THE NEW ZEALAND MAORI COUNCIL v THE ATTORNEY-GENERAL SC 98/2012 [27 February 2013]

IN THE SUPREME COURT OF NEW ZEALAND

SC 98/2012

[2013] NZSC 6

BETWEEN THE NEW ZEALAND MAORI

COUNCIL

First Appellant

AND THE WAIKATO RIVER AND DAMS

CLAIM TRUST

Second Appellant

AND THE ATTORNEY-GENERAL

First Respondent

AND THE MINISTER OF FINANCE

Second Respondent

AND THE MINISTER FOR STATE-OWNED

ENTERPRISES

Third Respondent

Hearing: 31 January and 1 February 2013

Court: Elias CJ, McGrath, William Young, Chambers and Glazebrook JJ

Counsel: C R Carruthers QC, P D Green and F Geiringer for Appellants

D J Goddard QC, J R Gough and S Kinsler for Respondents

P T Harman for V Winitana, G Morrell and F Timutimu (Interveners)

Judgment: 27 February 2013

JUDGMENT OF THE COURT

A The appeal is dismissed.

B No order is made as to costs.

REASONS

Table of contents

Para No Introduction [1] Background to the litigation Treaty claims to waters [10] The water consents held by Mighty River Power [12] The SOE case [15] The development of the mixed ownership company policy [19] The freshwater claim to the Waitangi Tribunal [21] The further consultation on “shares plus” [27] Is the proposed sale of shares in Mighty River Power reviewable for consistency with the principles of the Treaty of Waitangi? [31] The legislative context [32] Principal features of the new legislation [39] The submissions of the parties [46] Our evaluation [51] The effect of s 45Q [60] Alternative submission: s 22(3) [65] Is Cabinet’s decision to bring into effect the State-Owned Enterprises Amendment Act reviewable? [69] Submissions of the parties [70] Our assessment on the commencement issue [75] Was the Crown in breach of s 64 of the Waikato-Tainui Raupatu Claims (Waikato River) Settlement Act 2010? [78] The adequacy of the consultation following the Freshwater Report [83] Is the proposed sale of shares in Mighty River Power consistent with the principles of the Treaty of Waitangi? What is the test? [88] The underlying claims [93] Evolution of statutory regimes controlling the use of water [95] Positions of the parties as to ownership interests in water [99] An overview of the competing positions as to the extent of available Treaty claims [102] Treaty settlements involving water [106] Treaty principles and the SOE case [114] How the privatisation of the power-generating companies might impair the ability of the Crown to respond to claims – the contentions of the parties [116] The views of the Waitangi Tribunal [122] The approach of Ronald Young J in the High Court [128] Our approach – a preliminary comment [131] The effect of privatisation on direct claims against the lands of the State enterprise power-generating companies [134] The significance of privatisation in relation to the ownership and control of the power-generating companies [135] The effect of privatisation on more general reform of the law relating to the governance and management of water [142] The current social and legislative environment in relation to Treaty rights [147] Conclusion on this issue [149] Result [151]

Introduction

[1] The appeal concerns the restructuring of the Crown’s ownership of the State

enterprise, Mighty River Power Ltd. When the provisions of the State-Owned

Enterprises Amendment Act 2012 are brought into effect in respect of Mighty River

Power by Order in Council, the company will be reconstituted as a “mixed

ownership model company” under Part 5A of the Public Finance Act 1989.1 The

result will be to permit the Crown to sell up to 49 per cent of the shares in the

company which, as a State enterprise, is currently required by legislation to be

wholly owned by the Crown. The Crown has announced its intention to bring the

legislation into effect in relation to Mighty River Power and to offer 49 per cent of

the shares in it by initial public offering (IPO) in the first quarter of 2013.2

[2] The New Zealand Maori Council,3 the Waikato River and Dams Claim Trust

4

and the Pouakani Claims Trust5 each applied for declarations in the High Court that

the bringing into effect of the legislation removing Mighty River Power from the

State-Owned Enterprises Act 1986 and the proposed sale of 49 per cent of its shares

are unlawful by reason of s 9 of the State-Owned Enterprises Act and s 45Q of the

Public Finance Act, both of which prevent the Crown acting inconsistently with the

principles of the Treaty of Waitangi. There is an issue as to whether ss 9 and 45Q

apply. But, if they do, it is common ground in the litigation that the Crown

proposals will be inconsistent with the principles of the Treaty if they would

materially impair the ability of the Crown to act on recommendations of the

Waitangi Tribunal relating to Treaty breach. The claimed breaches in issue relate to

waters used for the generation of electricity and subject to Treaty claim.

1 Part 5A was inserted by s 9 of the Public Finance (Mixed Ownership Model) Amendment Act

2012 (the Mixed Ownership Amendment Act). 2 Although the present litigation is concerned with Mighty River Power Ltd (since it is the only

State enterprise in respect of which decisions have yet been taken) similar issues will arise in

relation to the partial privatisation of Meridian Energy Ltd and Genesis Energy Ltd under the

same legislation. Because of the potential consequence for their interests in Lake Waikaremoana

on a future privatisation of Genesis Energy, intervener status in the present appeal was granted to

Vernon Winitana, George Morrell and Frederick Timutimu who claim interests in the lake. 3 A statutory body set up under the provisions of the Maori Community Development Act 1962. It

has representative functions for Maori. 4 A trust comprising representatives of the Kiingitanga, Ngati Te Ata, Ngati Koroki-Kahukura, the

Pouakani people and the Pouakani Claims Trust, Tuhourangi-Ngati Wahiao, Ngati Tahu-Whaoa

and Ngati Hineure, being hapu and iwi with interests in the Waikato River and its catchment. 5 A trust whose representatives are the remaining trustees of the Pouakani Claims Trust. The Trust

is the mandated representative of the Pouakani people recognised under the provisions of the

Pouakani Claims Settlement Act 2000.

[3] The appellants were unsuccessful in the High Court.6 Ronald Young J held

that the change to the status of Mighty River Power which clears the way for sale of

shares is achieved by primary legislation which cannot be questioned for compliance

with the principles of the Treaty in the courts.7 In addition, he held that the proposed

actions of the Crown were not in any event inconsistent with the principles of the

Treaty because the sale of 49 per cent of Mighty River Power would not materially

prejudice Maori claims and interests in the water.8

[4] Whether the Judge was right in these conclusions is the principal question on

the appeal. The issues raised by the appellants are:

(a) Is the proposed sale of shares in Mighty River Power reviewable for

consistency with the principles of the Treaty of Waitangi?

(b) Is Cabinet’s decision to bring into effect the State-Owned Enterprises

Amendment Act reviewable?

(c) Is the proposed sale of shares in Mighty River Power in breach of

s 64 of the Waikato-Tainui Raupatu Claims (Waikato River)

Settlement Act 2010 (Settlement Act)?

(d) Was the consultation undertaken by the Crown with Maori following

the recommendation of the Waitangi Tribunal inconsistent with the

principles of the Treaty of Waitangi, in breach of s 45Q of the Public

Finance Act?

(e) Is the proposed sale of shares in Mighty River Power inconsistent

with the principles of the Treaty of Waitangi, in breach of s 45Q of the

Public Finance Act?

6 New Zealand Maori Council v Attorney-General [2012] NZHC 3338 [High Court judgment].

7 At [64].

8 At [219], [229], [237] and [240]–[241].

[5] The appeal from the High Court is brought directly to this Court9 at the

request of the Crown to meet the time constraints it has in finalising the IPO and

realising up to 49 per cent of the value of Mighty River Power for important

government purposes. Counsel have cooperated in preparing for and fully arguing

the appeal to meet a tight timetable. The Court has however been deprived of the

assistance of an intermediate appellate judgment. That circumstance and the fact

that some of the arguments touch on fundamental elements of the New Zealand legal

order prompt caution in straying beyond matters essential to disposition of the

appeal.

[6] The Court is unanimous on all questions on the appeal. Its reasons are

expressed in this single opinion.

[7] For the reasons that follow, we are of the view that the proposed sale of the

shares (on which the claim of material prejudice is based) is reviewable for

consistency with the principles of the Treaty. We explain our reasons for that

conclusion, in disagreement with the decision of Ronald Young J on the point, at

paragraphs [51]–[68]. Because of this conclusion, it is unnecessary for us to

determine whether the proposed Order in Council to bring the State-Owned

Enterprises Amendment Act into effect is also able to be reviewed for consistency

with the principles of the Treaty.

[8] We have concluded, however, that the partial privatisation of Mighty River

Power will not impair to a material extent the Crown’s ability to remedy any Treaty

breach in respect of Maori interests in the river, for reasons explained in

paragraphs [131]–[150]. For that reason, we decide that the appeal must be

dismissed.

[9] The appeal points based on breach of s 64 of the Settlement Act and

inadequacy of consultation fail for the reasons given at paragraphs [78]–[82] and

[83]–[87] respectively.

9 New Zealand Maori Council v Attorney-General [2012] NZSC 115.

Background to the litigation

Treaty claims to waters

[10] The Waikato River and other waters in respect of which Mighty River Power

has use rights are subject to long-standing claims of Treaty breach, based on Crown

failures to protect Maori in their “full exclusive and undisturbed possession” or “tino

rangatiratanga” of their water properties or taonga, as guaranteed by the Treaty. The

claims of breach include the damming, diversion, and use of the waters for the

generation of electricity by Mighty River Power and its predecessors, originally the

Department of Electricity. The Waitangi Tribunal has held in a number of decisions

relating to Maori claims of Treaty breach in relation to waters that the claims of

Treaty breach are well-founded10

and that Maori rights in relation of waters of

significance, such as the Waikato River, are in the nature of ownership.11

The

Tribunal has rejected Crown contentions that Maori rights were limited to the

exercise of kaitiakitanga.12

It has said that the customary rights of Maori included

authority over these resources (recognised in the Treaty guarantee of

rangatiratanga13

) and the right to economic benefit from their use.14

But it has

emphasised that waters are also valued for spiritual and cultural reasons:15

Rivers and other water bodies could be living beings or ancestors. In

whakapapa, Maori had kin relationships with these water bodies. Each had

its own mauri (life force), its taniwha (spirit guardians), and a central place

in tribal identity. And access was jealously guarded and controlled.

Travelling by waka, fishing, or other forms of use were only by permission

of the tribe which held mana over those waters. The importance of these

water bodies to Maori cannot be overstated. These things have long been

known.

10

Waitangi Tribunal Report of the Waitangi Tribunal on the Kaituna River Claim (Wai 4, 1984);

Waitangi Tribunal Report of the Waitangi Tribunal on the Manukau Claim (Wai 8, 1985);

Waitangi Tribunal Mohaka River Report 1992 (Wai 119, 1992); Waitangi Tribunal The

Whanganui River Report (Wai 167, 1993); Waitangi Tribunal Ngawha Geothermal Resource

Report, 1993 (Wai 304, 1993); Waitangi Tribunal Te Ika Whenua Rivers Report (Wai 212, 1998);

and Waitangi Tribunal He Maunga Rongo: Report on Central North Island Claims (Wai 1200,

2008). 11

Te Ika Whenua Rivers Report, above n 10; The Whanganui River Report, above n 10; and He

Maunga Rongo: Report on Central North Island Claims, above n 10. Affirmed in Waitangi

Tribunal The Stage 1 Report on the National Freshwater and Geothermal Resources Claim (Wai

2358, 2012) [Freshwater Report] at [2.8.3(1)]. 12

He Maunga Rongo: Report on Central North Island Claims, above n 11, at 1410. 13

At 1410. 14

At 914. 15

Freshwater Report, above n 11, pre-publication letter of transmittal, at appendix VII.

[11] In its recent interim report on the National Freshwater and Geothermal

Claim (a claim heard urgently to consider whether the proposed partial privatisation

of the State enterprises would be in Treaty breach and which is more fully described

at [21]–[30] below), the Waitangi Tribunal found that “the proprietary right

guaranteed to hapu and iwi by the Treaty in 1840 was the exclusive right to control

access to and use of the water while it was in their rohe”.16

The Tribunal has

recognised that the customary authority exercised in 1840 must be adapted to meet

modern circumstances and the need for resources to be shared with all

New Zealanders.17

How the Treaty rights may be recognised in modern

circumstances is to be the subject of the second stage of the Freshwater inquiry,

which the Tribunal expects to begin hearing this year. That second stage will build

on the finding the Waitangi Tribunal has made in its interim report that Maori rights

in relation to water guaranteed by the Treaty are in the nature of ownership. It will

inquire into whether such rights and interests are adequately recognised and provided

for under existing legislative regulation and whether Crown policies (including those

it is developing through its Fresh Start for Fresh Water review) are in breach of the

Treaty.18

If Treaty breach is found, the Tribunal will consider what steps should be

taken to meet Treaty compliance.

The water consents held by Mighty River Power

[12] As its name suggests, the generating business operated by Mighty River

Power is principally based on the Waikato River but includes also geothermal

generating facilities. The Waikato hydro system itself comprises eight dams on the

river. The Waikato hydro system is operated today with three principal resource

consents to dam and divert the river and a number of ancillary consents. All current

permits were granted in 2006 by the Waikato Regional Council to Mighty River

Power on its application under the Resource Management Act 1991.19

16

Freshwater Report, above n 11, at pre-publication letter of transmittal, at appendix VII (The

emphasis is in the original). 17

Freshwater Report, above n 11, at [1.4.2]. 18

The statement of issues for stage two of the inquiry is recorded in an appendix to the stage 1

report. See Freshwater Report, above n 11, at appendix 1. 19

The resource consents were granted following a decision of Environment Waikato. See Waikato

Regional Council Hearing Committee Mighty River Power Taupo-Waikato Consents Decision

Report (Environment Waikato, 29 August 2003).

[13] The 2006 permits held by Mighty River Power replaced perpetual rights

obtained by the Crown under a number of statutes and powers when the hydro-

electricity developments were first undertaken. The first generating capacity was set

up in 1918 on the river, but the principal developments occurred from the late 1950s.

When the water rights were transferred as part of the assets which passed to the State

enterprise Electricity Corporation of New Zealand in April 1988, it was on the basis

that the State enterprise would apply for water consents limited to a maximum term

of 35 years.20

Mighty River Power (to which the Waikato hydro system was

transferred in 199821

) applied in 2001 for the consents granted in 2006 under the

Resource Management Act.

[14] The present primary permits are for a term of 35 years (the maximum

permissible under the Resource Management Act22

), expiring on 6 May 2041. Since

the rights applied for were for controlled use activities under the Proposed Regional

Plan (reflecting the existing use for the damming of water23

), consent could not be

declined,24

although the term of the permits and the conditions to be attached to them

were the subject of a contested hearing in which Maori affected participated. The

terms of the primary permits held by Mighty River Power provide for review of

conditions on the occurrence of certain events. One such event includes any change

to the conditions of consent granted to the operators of the Tongariro Power

Development Scheme (which has been the subject of Treaty claims). Another

provides:

Within 12 months of the Crown settling any claim made under the provisions

of the Treaty of Waitangi Act (1975) the Waikato Regional Council may,

following service of notice on the consent holder, commence a review of the

conditions of this consent pursuant to s 128(1) of the RMA for the purpose

of ensuring that this consent is in alignment with the provision of any such

settled claim.

20

It was provided in the sale deed with Electricity Corporation of New Zealand that the rights

obtained could be reduced to a term of 35 years without breach of the deed. 21

Mighty River Power was at this time named “Waikato SOE Limited”. 22

Resource Management Act 1991, s 123(d). 23

Waikato Proposed Regional Plan, r 3.6.4.10. 24

At the time the decision was made, s 77B of the Resource Management Act provided that, where

a resource consent was required for a controlled activity, the consent authority had no power to

decline the resource consent. Section 105(1)(a) was to the same effect. The equivalent

provision today is s 87A(2).

As this condition suggests, it was known at the time the consent was granted that the

Waikato River was the subject of claims to the Waitangi Tribunal. The condition

ensures that, even within the term of the consent, adjustment may be provided to

reflect the terms of any settlement of the claims.

The SOE case

[15] The relinquishment of perpetual rights to use water in the transfer to the State

enterprises and the 35 maximum year term later imposed under the Resource

Management Act reflect the settlement reached in New Zealand Maori Council v

Attorney-General (SOE case).25

The background to that case was the major

governmental restructuring by which the trading operations of the Crown were re-

organised as State enterprise companies under the State-Owned Enterprises Act in

order to promote the efficient management of the activities transferred.26

It is

necessary to refer to the reasons given in the Court of Appeal in the SOE case in

some detail when considering the meaning and scope of s 45Q.27

For present

purposes it is sufficient to indicate what the litigation was about and how it was

resolved.

[16] In the SOE case, the Court of Appeal granted declaratory relief. It declared

that the proposed transfer from the Crown to State enterprises of assets from which

reparation for Treaty breaches might foreseeably be made on recommendation of the

Waitangi Tribunal was inconsistent with the principles of the Treaty. It held that

assets could not be transferred until a scheme of safeguards was put in place giving

reasonable assurance that lands or waters will not be transferred in such a way as to

prejudice Maori claims. That relief was given despite the State enterprises being

wholly owned by the Crown. And it was made despite acknowledgement by the

Court that the Solicitor-General had a “solid basis” for the submission that “the

25

New Zealand Maori Council v Attorney-General [1987] 1 NZLR 641 (HC & CA) [SOE case].

This case is frequently called the Lands case; we shall refer to it in this judgment as the SOE

case, because, as we shall explain, what was in issue in that case was not only land but also

water. 26

The purpose of the changes was described at the time by the then Deputy Chairman of the State

Services Commission in evidence set out in the judgment of the Court of Appeal at 651. 27

See below at [52]–[59].

momentum evidently expected by Parliament would be largely lost” and that the Act

as a whole “would be put in limbo for an unpredictable time”.28

[17] As the declarations made in the Court of Appeal in the SOE case indicate,

actual and foreseeable claims to the Waitangi Tribunal were concerned with Treaty

breach in relation to water as well as land.29

The two risks identified in the case of

transfer of assets without a system of protection for land and waters were that the

Crown might be unwilling or unable to negotiate a purchase back from the State

enterprise at a full price and that the State enterprise might, in the meantime, have

disposed of land to third parties in the course of its ordinary business activities.

Disposal to third parties of water rights was not in prospect because the water rights

were integral to the businesses of the generating State enterprise. In respect of land,

however, there was nothing to prevent a State enterprise from disposing of land

surplus to its operations. The Court considered that the existing legislative

protection for Treaty claims under s 27 (limited to land already under claim to the

Waitangi Tribunal) was inadequate to protect foreseeable claims. It rejected the

contention of the Crown that s 27 was a code representing a legislative judgment that

transfers of other land complied with the principles of the Treaty.30

The Court of

Appeal directed the Crown to prepare a scheme of safeguards for approval, if

necessary, by the Court before the assets could be transferred.31

[18] The SOE litigation was resolved by agreement, allowing the declarations to

be discharged and permitting transfer of the Crown assets, including water rights, to

the State enterprises.32

The basis of settlement included new legislative protections

for land transferred to the State enterprises which required memorials on the title,

with provision for resumption and return of such land should the Waitangi Tribunal

recommend that course.33

It also contained a protection for claims to water which

required the use rights transferred to be limited to 35 year terms, instead of being

28

At 657–658. 29

At 666. 30

Per Cooke P at 658, Richardson J at 679, Somers J at 696, Casey J at 701, and Bisson J at 716. 31

At 666. 32

At 719. 33

Sections 27A–27D.

perpetual.34

The letter recording the settlement, dated and produced to the Court of

Appeal, provided:

The Government agrees that it will not transfer to any State Owned

Enterprise water rights that have been issued in perpetuity. The Government

will seek a variation of such water rights so as to ensure that they are for

periods no longer than 35 years.

The development of the mixed ownership company policy

[19] Decisions to proceed in principle with bringing the three electricity

generating State enterprises within a new mixed ownership model were taken by

Cabinet in December 2011. Because it was appreciated that Maori might wish to

seek clarification about how the proposals would affect claims to natural resources

(including water), informal consultation with iwi leaders had already been initiated

with a forum held in August 2011. The Deputy Prime Minister, Mr English,

described in evidence to the High Court the further discussions held with iwi

representatives and the New Zealand Maori Council between August 2011 and the

introduction of the Bill into the House in March 2012. He and other Ministers

explained during the consultation that ss 27A–27D of the State-Owned Enterprises

Act would be reproduced in the legislation dealing with the mixed ownership

companies, thus preserving the land resumption provisions adopted in 1987 in the

SOE settlement. They raised with iwi leaders the opportunities the IPO provided for

Maori to take up shareholding in the companies, if they wished to do so. There was

discussion about advancing settlement moneys for that purpose to those iwi who had

not yet entered into Treaty settlements.

[20] The consultation provided Government with the message that many Maori

considered that it was necessary to carry s 9 of the State-Owned Enterprises Act into

the new legislation so that the Crown would remain bound to observe the principles

of the Treaty in its dealings with the mixed ownership company. As a result,

Cabinet agreed to the inclusion of an equivalent provision which would apply to the

Crown in relation to its actions under the mixed ownership model legislation. The

provision discussed became s 45Q of Part 5A of the Public Finance Act. The

34

Resource Management Act 1991, s 386(2).

consultation also led to the setting up of a working party between senior Ministers

and iwi leaders to advance direct Treaty settlement negotiations and the development

of policy through the Fresh Start for Fresh Water process (which began work in

2009), which includes consideration of Maori interests in water. The protocol under

which the engagement between iwi leaders and Ministers is conducted makes it clear

that it does not supplant the need for wider engagement in the development of

freshwater policy with iwi not represented by the iwi leaders included in the forum.

The freshwater claim to the Waitangi Tribunal

[21] In an urgent claim to the Waitangi Tribunal filed in February 2012, the

New Zealand Maori Council sought a recommendation that the Crown should not

proceed with the partial privatisation of the three State enterprises which generate

hydro-electricity. The Waitangi Tribunal divided the hearing. It considered that it

was not reasonable to hold up the privatisation while a full review of how Maori

interests in water can be recognised was undertaken. That review was deferred to a

second stage of the hearing, which the Tribunal proposed would be heard in 2013.

[22] The Tribunal did however grant urgency to the claim that the sale of shares in

the State enterprises would be in breach of the principles of the Treaty. As has been

indicated, in its interim report on that urgent inquiry the Tribunal found that Maori

interests in waters used by the State enterprises were in the nature of ownership:35

Our generic finding is that Maori had rights and interests in their water

bodies for which the closest English equivalent in 1840 was ownership

rights, and that such rights were confirmed, guaranteed, and protected by the

Treaty of Waitangi, save to the extent that there was an expectation in the

Treaty that the waters would be shared with the incoming settlers. In

agreement with the Te Ika Whenua Rivers Report, The Whanganui River

Report, and He Maunga Rongo, we say that the nature and extent of the

proprietary right was the exclusive right to control access to and use of the

water while it was in their rohe.

[23] As is described in more detail below, the Waitangi Tribunal accepted that

there was a nexus between the Treaty claims to water and the shareholding in the

State enterprises which use the waters under claim for generating purposes. Such

connection reflected the fact that the water used “underpins what gives the shares in

35

Freshwater Report, above n 11, at [2.8.3(3)].

those companies their value”.36

The Tribunal accepted however the submission of

the Crown and the assurance of the Prime Minister that Maori participation through

ownership of shares in the company (if that is what Maori want) was not precluded

after the IPO.37

If that form of reparation for Treaty breach proved appropriate, it

considered that shares could be purchased either at the time of the IPO (the Crown

having indicated that those iwi which had not received settlements could be financed

into their purchases by advances to be deducted from future settlements with them)

or later, by purchases on the market.

[24] What the Tribunal thought would, however, be precluded by the partial

privatisation was reparation which provided Maori with more authority in relation to

the company than went with minority ownership of ordinary shares. Such additional

authority was thought necessary to reflect the Treaty guarantee of rangatiratanga and

the ownership interest in the waters themselves. On this view, the shares would not

be adequate reparation if they were “solely ... an investment opportunity for the

purpose of acquiring dividends or selling the shares later at a profit”.38

Once the IPO

had admitted private shareholders in the company, the Tribunal considered that

securing special standing for Maori shareholders within the shareholding structure,

such as through provision in the company constitution or through a class of special

shares to protect their interests, would no longer be available:39

As a result, the very asset being transferred by the Crown, and which is

sought by Maori in partial remedy for this claim, will in practical terms be

put beyond the Crown’s ability to recover or provide after the sale. Since it

cannot be stated with certainty that any other commercial rights recognition

will actually come to pass, and given the opportunity exists here and now,

and that opportunity is about to be removed beyond the Crown’s practical

ability to provide, we consider that the sale must be delayed while an

accommodation is reached with Maori.

[25] Because of the inability to provide what it described as “shares plus”, the

Waitangi Tribunal recommended in its urgent interim report that the plans for

privatisation should not proceed until there had been consultation with Maori

through a national hui “to determine a way forward”.40

Since the Tribunal

36

At [3.7.2]. 37

At [3.9.2]. 38

At [3.7.2]. 39

See the pre-publication letter of transmittal, at appendix VII. 40

At [3.9.4].

considered there was a nexus established between the asset (“shares enhanced by

shareholders’ agreements and revamped company constitutions”41

) and Maori rights

in the waters used, the Crown would be in Treaty breach if it proceeded with the sale

without “first preserving its ability to recognise Maori rights or remedy their

breach”.42

Accordingly, it recommended “that the sale be delayed while the Treaty

partners negotiate a solution to this dilemma”.43

The Tribunal recognised that the

negotiations would need to be limited because of urgency and that it “would not be

possible to devise a comprehensive scheme for the recognition of Maori rights in

water in the time available”:44

But it should be possible, with good faith endeavours on both sides, to

negotiate with all due speed an appropriate scheme in respect of these three

power-generating companies. In the narrowest view, the subject for

discussion is shares and shareholders’ agreements in Mighty River Power.

That could include discussion of the use of shares for a number of settlement

or rights recognition purposes, where there is not a nexus to rivers utilised by

Mighty River Power, such as was raised by Ngati Haka Patuheuheu. As we

see it, it would be preferable to take a broader approach in this way and also

to consider other commercial options such as royalties at the same time, and

perhaps the opportunity to write such matters into the company

constitutions; but all that is for the parties to decide. Undertakings could

perhaps be negotiated about future forms of rights recognition. We would

not want to be prescriptive about these matters.

[26] The Waitangi Tribunal therefore recommended a process of consultation

which should be followed before the privatisation continued. It did not identify a

solution, indicating that how Maori interests should be recognised and provided for

in modern circumstances would be addressed in its final report after further hearings.

Rather, it left it to the Crown and Maori to explore ways in which the ownership

claim could be protected. The letter transmitting the report suggested that such

consultation could be conducted on the “narrowest view” of “shares and

shareholders’ agreements in Mighty River Power”. It could, alternatively, include

“discussion of the use of shares for a number of settlement or rights recognition

purposes, where there is not a nexus to rivers utilised by Mighty River Power”. And,

if a “broader approach” in this way were adopted (as the Waitangi Tribunal

suggested would be preferable), there should also be consideration of “other

41

As described in the pre-publication letter of transmittal, at appendix VII. 42

At [3.9.4]. 43

At [3.9.4]. 44

At [3.9.4].

commercial options” (including royalties, arrangements in the company constitutions

and undertakings about “future forms of rights recognition”).45

The further consultation on “shares plus”

[27] The Crown accepted the recommendation that it investigate the “shares plus”

option. It undertook consultation with Maori on the suggestion. Although the

Tribunal had recommended a national hui (in apparent response to the urgency from

the Crown perspective in meeting the privatisation timetable), the Crown decided, on

the basis of the Tribunal’s finding that interests in water were localised and specific,

that it would be more appropriate to consult groups with direct interest in particular

water resources. It wrote to all affected groups setting out the Government’s

preliminary view that shares with amplified authority would not be appropriate and

inviting submissions. Between 18 and 27 September 2012, the Crown held a series

of hui at Hamilton, Taupo, Te Kuiti, Whanganui, Tuai and Christchurch. The

Deputy Prime Minister led the Crown team. The Crown’s presentations explained

the view that, although “shares plus” could be one way of providing redress, there

were other equally effective ways to provide redress after the proposed sale.

Participants were invited to express views as to whether the Government should

preserve the “shares plus” option before proceeding with the sale.

[28] Many of those consulted were disappointed that only the idea of “shares

plus” was under consideration at the meetings. They did not consider that such an

arrangement met their Treaty claims. In his evidence, the Deputy Prime Minister

reported that the response from Maori at the hui to the “shares plus” suggestion of

the Tribunal was “lukewarm”. Most wanted the Crown to retain full ownership of

Mighty River Power until Maori interests in freshwater had been identified and

addressed. That was, however, not something the Tribunal had considered it was

reasonable to recommend.

[29] Ultimately, after considering the submissions and discussion at the hui and

after receiving advice from officials, Ministers concluded that the Crown’s capacity

to recognise rights and to provide redress would not be impaired by the proposed

45

At [3.9.4].

share sale. On the other hand, it appeared to the Crown that the Waitangi Tribunal’s

suggestion would significantly erode value in the IPO. For these reasons, the Crown

announced on 15 October 2012 that it had decided to go ahead with the IPO without

adapting the shareholder structure.

[30] The New Zealand Maori Council filed its application for judicial review in

the High Court on 19 October 2012. The claims by Pouakani and the Waikato River

Trust were made on 2 November 2012 and 6 November 2012 respectively.

Is the proposed sale of shares in Mighty River Power reviewable for consistency

with the principles of the Treaty of Waitangi?

[31] In order to understand the appellants’ challenge, it is necessary to put s 45Q

and the 2012 legislation creating mixed ownership companies into its legislative

context. The starting point is the State-Owned Enterprises Act.

The legislative context

[32] In 1986 Parliament established a regime of State enterprises, under which

companies were to be formed to acquire State trading undertakings. The long title to

the State-Owned Enterprises Act stated that its object was “to promote improved

performance in respect of Government trading activities” and, to that end, “specify

principles governing the operation of State enterprises”.

[33] Part 1 of the State-Owned Enterprises Act is headed “Principles”. Section 4

provides that “[t]he principal objective of every State enterprise shall be to operate as

a successful business” and, to that end, be as profitable and efficient as comparable

businesses not owned by the Crown, be a good employer, and exhibit a sense of

social responsibility. Section 5 provides for operational decisions to be made by the

directors of each State enterprise in accordance with its statement of corporate intent,

which, under s 14(2)(a) and (b), must specify the objectives of the State enterprise

and the nature and scope of its activities. Under s 13, Ministers may give the board

of a State enterprise directions, with which the board is required to comply, as to the

objectives and nature and scope of its activities which should be set out in the

statement of corporate intent.46

Under s 5(3), the board of the State enterprise is

accountable to shareholding Ministers. Section 6 provides that shareholding

Ministers are responsible to the House of Representatives.

[34] Part 1 concludes with s 9:

9 Treaty of Waitangi

Nothing in this Act shall permit the Crown to act in a manner that is

inconsistent with the principles of the Treaty of Waitangi.

[35] Section 9 has been the subject of definitive judicial interpretation,

particularly in the SOE case. We shall be returning to that case shortly.

[36] In Part 2 of the Act, s 10 states that shareholding Ministers may subscribe for

and hold the shares in State enterprise companies and s 11(1) prohibits a Minister

from disposing of or selling any shares. In Part 4, s 22(3) states that shareholding

Ministers “may exercise all the rights and powers attaching to the shares in a State

enterprise”. Section 23 empowers transfer of Crown assets and liabilities to the State

enterprises. When assets or liabilities are transferred to a State enterprise, the

transfer does not entitle any person to terminate, alter or in any way affect the rights

or liabilities of the Crown in the State enterprise under any Act or agreement. On

transferring assets under s 23, the Crown can impose conditions on the State

enterprise.47

Section 28 provides for transfer of assets to be effected by Orders in

Council.

[37] Sections 27 and 27A–27D deal with Maori land claims and provide for

resumption of land transferred to State enterprises on the recommendation of the

Waitangi Tribunal and for memorials to be entered on titles to land subject to claims.

Sections 27A–27D were added to the State-Owned Enterprises Act by the Treaty of

Waitangi (State Enterprises) Act 1988, to give effect to the compromise reached

between the Government and the New Zealand Maori Council following the

judgment of the Court of Appeal in the SOE case.

46

See New Zealand Maori Council v Attorney-General [1994] 1 NZLR 513 (PC) [Broadcasting

Assets case (PC)] at 520. 47

At 520.

[38] A policy of the National Party in the 2011 general election was the partial

sale of four State enterprises: Mighty River Power, Genesis Energy, Meridian

Energy and Solid Energy. In implementing decisions in principle taken by Cabinet

in December 2011,48

Ministers settled on a scheme of legislative reform to be given

effect in two steps by separate statutes. First, the Public Finance Act, which governs

the use of public financial resources, would be amended to include provisions for a

new “mixed ownership” model of company in which Ministers would hold not less

than 51 per cent of the shares, with up to 49 per cent being held by persons other

than the Crown. In the second step, the status of the above-named companies would

be changed, so that they would cease to be State enterprises. The companies would

become mixed ownership companies and the sale of shares up to the set limits would

then be permitted.

Principal features of the new legislation

[39] We now refer to the principal features of the new legislation. We begin with

the Mixed Ownership Amendment Act.

[40] The Mixed Ownership Amendment Act introduced a new Part 5A into the

Public Finance Act headed “Mixed ownership model companies” and comprising

ss 45P–45W. Section 4 of the Amendment Act added to the Public Finance Act the

new purpose of placing limits on ownership of the companies named in sch 5, being

the listed mixed ownership companies.49

Section 45Q in Part 5A is expressed in

identical terms to s 9 of the State-Owned Enterprises Act with an additional

subsection:

45Q Treaty of Waitangi (Te Tiriti o Waitangi)

(1) Nothing in this Part shall permit the Crown to act in a manner that is

inconsistent with the principles of the Treaty of Waitangi (Te Tiriti o

Waitangi).

(2) For the avoidance of doubt, subsection (1) does not apply to persons

other than the Crown.

48

See at [19] above. 49

Section 4 inserted s 1A(2)(ea) into the Public Finance Act 1989.

[41] Subsection (2) makes clear that only Crown action must be Treaty-compliant.

Subsection (1) does not apply to the mixed ownership companies or to the directors

of those companies.

[42] Section 45R prohibits Ministers from selling or disposing of shares, or taking

other specified action, if that would result in the Crown having less than 51 per cent

control of a mixed ownership company.50

Section 45S sets a 10 per cent limit on the

holding of shares or voting securities by persons other than the Crown. Section 45W

states that certain provisions in the State-Owned Enterprises Act, including ss 22 and

23 along with some definitions, will continue to apply to mixed ownership

companies as if they were State enterprises. The protective scheme in ss 27A–27D

of the State-Owned Enterprises Act and provisions in the Treaty of Waitangi Act

1975 concerning resumption51

are also incorporated into Part 5A. The Mixed

Ownership Amendment Act received the Royal assent on 29 June 2012 and came

into force the following day.

[43] We now turn to the second step in the legislative scheme, effected by the

State-Owned Enterprises Amendment Act. This Act has not yet been brought into

force.

[44] The State-Owned Enterprises Amendment Act would amend the State-

Owned Enterprises Act by reconstituting four State enterprises as mixed ownership

companies. Sections 4 and 5 repeal reference to four companies, including Mighty

River Power, in the list of State enterprises in the first and second schedules of the

State-Owned Enterprises Act. Section 8 amends the Public Finance Act by

providing for the names of the companies to be inserted in sch 5. The effect is to

bring the companies under the Part 5A regime when the provisions of the State-

Owned Enterprises Amendment Act are brought into force in relation to each

company. Section 2 of the State-Owned Enterprises Amendment Act provides for

the amendment to be brought into force by Order in Council. Different provisions

may be brought into force on different dates.

50

The requirement of a minimum 51 per cent Crown ownership applies to every class of share:

s 45R(4). 51

Treaty of Waitangi Act 1975, ss 8A–8H.

[45] It is the present intention of the Government that the State-Owned

Enterprises Amendment Act will initially be brought into effect only in respect of

Mighty River Power, which is the first company scheduled for partial privatisation as

a mixed ownership company. It is intended that the Order in Council will be

promulgated shortly before the sale transactions take place. Once the legislation is

commenced, bringing a company within the mixed ownership model regime, it

remains possible, under s 3C of the Public Finance Act, to reverse the process by

Order in Council and remove the company from sch 5 of the Act, but only if

shareholding Ministers hold 100 per cent of the shares in the company.52

The submissions of the parties

[46] This appeal raises the issue of whether a sale of shares under the statutory

scheme will be in breach of the Crown’s obligations under the Treaty principles

protection provisions. It has been necessary to set out the main provisions of the

current and previous applicable legislation in some detail, as the arguments of both

parties to the appeal were based on the statutory text and context.

[47] On the legal analysis of the appellants, infringement of the principles of the

Treaty will occur when the State-Owned Enterprises Amendment Act is brought into

effect by Order in Council, and on subsequent sale of up to 49 per cent of the shares

in Mighty River Power, unless proper protective measures are first put in place to

preserve Crown capacity to meet its Treaty obligations. This result is argued to be

contrary to both s 9 of the State-Owned Enterprises Act and s 45Q of the Public

Finance Act. The submission for the appellants was that the prospective sale of

shares would be an exercise by the Crown of powers under Part 5A, generally, or the

rights of shareholding Ministers under s 22(3) of the State-Owned Enterprises Act,

itself preserved by s 45W of the Public Finance Act, to which s 45Q applied. It was

therefore subject to the requirements of consistency with Treaty principles.

[48] Mr Goddard responded directly to the argument that the prospective sale

would be an exercise of statutory powers under Part 5A generally or s 22(3) in

particular. He submitted that the purpose of Parliament in enacting the 2012

52

Public Finance Act 1989, s 3C(3).

legislation was to enable the Government to sell up to 49 per cent of the shares in the

company. It was not part of Parliament’s intention that the Crown first determine

whether that step was consistent with the principles of the Treaty. Those principles

were to be protected by preserving the application of the protective provisions of the

memorial regime of the State-Owned Enterprises Act. As well, s 45Q would protect

Treaty principles in respect of actions taken under Part 5A, but those actions did not

include the sale of the shares. The power of the Crown to sell shares was an incident

of their ownership and shareholder powers under the common law and the

Companies Act 1993. It was not derived from s 22(3), nor any other provision in

Part 5A. Mr Goddard’s argument was that the provisions of Part 5A restrict rather

than “permit” the power to sell shares – for example by limiting sale to only 49 per

cent of shares. As the sale of shares does not involve an act under Part 5A, the

Crown argued that s 45Q does not apply to the act of selling shares.

[49] The Crown said that its argument that s 45Q has no application to a sale of

shares, and that therefore a decision to sell is not reviewable for consistency with

Treaty principles, finds support in observations of the Court of Appeal in

New Zealand Maori Council v Attorney-General (Commercial Radio Assets case).53

In 1995, two statutes were passed to enable full privatisation of Radio New Zealand.

The Radio New Zealand Act 1995 was brought into force by Order in Council soon

after receiving the Royal assent. It transferred public radio assets from Radio

New Zealand to a newly-formed Crown entity. The result was that Radio

New Zealand, a State enterprise, was left holding only commercial radio assets. The

Radio New Zealand Act (No 2) 1995 was passed on the same day as the first Act,

and it, too, was to come into force on a day appointed by Order in Council. At the

time of the proceedings, the second Act had not been brought into force. Once the

second Act was commenced, its provisions would have removed Radio New Zealand

and the shareholding Ministers from the application of the State-Owned Enterprises

Act. Both the prohibition on sale of shares and s 9 of the State-Owned Enterprises

Act would cease to apply to the company. In that legislative context, the Court of

Appeal said:54

53

New Zealand Maori Council v Attorney-General [1996] 3 NZLR 140 (CA) [Commercial Radio

Assets case]. 54

At 166.

In selling the shares after the (No 2) Act is in force the Crown will not be

exercising any statutory power. The (No 2) Act does not expressly authorise

sale of the shares though its effect will be to remove the prohibition on the

sale of these shares in s 11 of the State-Owned Enterprises Act. The sale

would be effected simply by exercise of the Crown’s common law right as

owner to dispose of the shares.

[50] The Crown said that this passage supported its submission that in selling the

shares in Mighty River Power the Crown would not be exercising any power under

Part 5A, so that s 45Q did not require that the Crown act consistently with Treaty

principles. That section would apply to a transfer of assets to the mixed ownership

company under s 23 of the State-Owned Enterprises Act. Section 9 had no

application as shareholding Ministers were no longer bound by the State-Owned

Enterprises Act.

Our evaluation

[51] It is true that the statutory scheme of the 2012 legislation has common

features with that examined in the Commercial Radio Assets case, in that under the

latter the proposed sale was also to proceed only when separate legislation removing

the prohibition on sale of the shares was brought into effect. But there is a crucial

difference. In the present circumstances, unlike in the Commercial Radio Assets

case, the legislation clearing the way for sale provides for the Crown to remain under

a continuing obligation to comply with Treaty principles when acting under the

statutory provisions governing the mixed ownership companies regime.

Furthermore, the move from the application of s 9 to that of s 45Q is seamless.

There was no such continuing restraint under the legislation authorising sale of the

shares in Radio New Zealand, once it had ceased to be a State enterprise. In the

present case, the continuing statutory restraint upon the Crown when acting in

respect of a mixed ownership company must be ascertained in light of the

continuation of the Treaty protection provision in s 45Q .

[52] At this point it is helpful to consider how s 9 of the State-Owned Enterprises

Act was interpreted and applied by the Court of Appeal in its judgment the SOE

case, a decision already discussed55

and of great authority and importance to the law

concerning the relationship between the Crown and Maori.

[53] The SOE case was concerned with the Crown’s power under s 23 to transfer

the operating assets of its trading undertakings, in particular land, to the new State

enterprises. Permitted methods included, but were not confined to, outright transfer

of such land. Section 27 set out particular safeguards for land transferred to State

enterprises, in respect of claims already lodged with or determined by the Waitangi

Tribunal, but did not provide for claims lodged after the State-Owned Enterprises

Act came into effect. In such cases the land would not be available for settlement of

claims which the Tribunal held were deserving of a remedy.

[54] The Court of Appeal considered submissions of the Crown which sought a

narrow meaning for s 9, because a broad reading of its text would not align with the

policy decisions of Parliament concerning the effective operation of State

enterprises. Further protections than those expressly provided for in the Act would

have “inconvenient practical consequences” for the statutory policy.56

Parliament

could not have intended that the transfer of assets under the Act should be delayed as

the appellants sought, as that would put the whole State enterprise scheme “in

limbo”.57

The Crown submitted that s 9 should accordingly not be read as fettering

transfer of land to State enterprises and s 27 should be seen as an exclusive code for

protection of Maori claims to land in accordance with the principles of the Treaty.58

[55] The Court of Appeal firmly rejected that narrow approach to the meaning of

s 9. It held that s 9 was a provision expressing a broad constitutional principle while

s 27 merely gave that principle practical effect in the particular case of land subject

to claims at the time of the enactment. Cooke P said of s 9 that:59

... the firm declaration by Parliament that nothing in the Act shall permit the

Crown to act inconsistently with the principles of the Treaty must be held to

mean what it says. Cases will arise when the machinery provisions made for

meeting Maori land claims by s 27 will not be enough ...

55

At [15]–[18] above. 56

SOE case, above n 25, at 657 per Cooke P. 57

At 657. 58

At 658. 59

At 660–661.

… what is now our responsibility is to say clearly that the Act of Parliament

restricts the Crown to acting under it in accordance with the principles of the

Treaty. It becomes the duty of the Court to check, when called upon to do so

in any case that arises, whether that restriction has been observed and, if not,

to grant a remedy. Any other answer to the question of interpretation would

go close to treating the declaration made by Parliament about the Treaty as a

dead letter ...

[56] Richardson J identified further reasons why s 9 had to be given full effect:60

... the importance the legislature attached to compliance with the principles

of the Treaty is reflected in the enactment of s 9 as a governing principle of

the legislation. ...

and

... rather than viewing s 9 as a provision outwardly raising expectations then

dashing them by a process of inference from other provisions, its true

function in the Act should be recognised as constituting a general

proscription of any conduct in breach of the principles of the Treaty and as

such being a governing consideration in the exercise of the powers under

s 23, with s 27 then being seen as specific machinery for dealing in due time

with such land held by State-owned enterprises.

[57] Other members of the Court made similar observations concerning s 9.

Somers J described it as a “paramount provision” and referred to the “apparent

predominance of its provisions”.61

Casey J referred to its “strong and unambiguous

language” having an “overriding result on the rest of the Act”.62

Bisson J said that

s 9 introduced to the State-Owned Enterprises Act “a safeguard” so that the

“dramatic legislative change” would not frustrate applications of Maori to the

Waitangi Tribunal concerning their Treaty claims.63

[58] We observe in passing that, if the Crown had thought the Court of Appeal

had approached s 9 wrongly, it could have appealed to the Privy Council. It did not.

Nor did it challenge the SOE case in this appeal.

[59] The Court of Appeal’s recognition that s 9 stated a fundamental principle

guiding the interpretation of legislation which addressed issues involving the

relationship of Maori with the Crown, must accordingly form the basis of the

60

At 680. 61

At 696. 62

At 701. 63

At 710.

approach of New Zealand courts to any subsequent legislation requiring that the

Crown act consistently with Treaty principles. The judgment gives no support to

narrow approaches to the meaning of such clauses. In re-enacting the identical

provision to act consistently with Treaty principles, in the mixed ownership

companies legislation, Parliament’s purpose is that the Treaty provisions in Part 5A

carry the broad meaning, and be given the broad application reflected in the

judgments of the Court of Appeal concerning s 9 in the SOE case. The

Parliamentary purpose is clear: s 45Q must receive the same interpretation as s 9 of

the State-Owned Enterprises Act has received, particularly from the Court of Appeal

in the SOE case, and also from the Privy Council in New Zealand Maori Council v

Attorney-General (Broadcasting Assets case).64

Section 45Q brings with it the

heritage of s 9 and this Court, reflecting what is the purpose of Parliament, must

invest it with equivalent significance. It is on that basis that we address the

arguments of counsel concerning the legislation.

The effect of s 45Q

[60] Once a company is in the mixed ownership companies regime, s 45Q of the

Public Finance Act provides, as we have said, that nothing in Part 5A permits the

Crown to act in a manner that is inconsistent with the principles of the Treaty. It is

very significant that Parliament has used in Part 5A the identical Treaty provision

contained in s 9 of the State-Owned Enterprises Act.

[61] Parliament’s enactment of s 45Q demonstrates a concern that there is

potential Crown action under Part 5A which might, but for the restraint imposed by

s 45Q, be inconsistent with the principles of the Treaty. The part effectively deals

with only one matter: the setting up and ownership of mixed ownership companies.

Parliament must have intended that all acts of the Crown in relation to share

ownership be exercised in a Treaty-consistent manner. Mr Goddard submitted s 45Q

could not bite on the act of selling shares because the Crown could do that in any

event as owner of them. We cannot accept that submission. While State enterprises

are and mixed ownership companies will be like ordinary companies in most

64

Broadcasting Assets case (PC), above n 46.

respects, the Crown’s status as shareholders is constrained by the relevant

legislation. Under the State-Owned Enterprises Act, the Crown cannot sell shares.

Under Part 5A, the Crown’s ability to exercise its ownership will remain

constrained.

[62] Further, Mr Goddard’s submission reduces s 45Q to mere window-dressing,

something quite inconsistent with curial treatment of the same provision in the State-

Owned Enterprises Act. As Mr Goddard emphasised in the balance of his

submissions, the Government’s mixed ownership model policy is very limited. It

does not envisage the transfer of more Crown assets to mixed ownership companies.

All it involves is the sale of some of the shares in particular State enterprises to the

public. Nothing else changes so far as Crown assets are concerned.

[63] Giving effect to s 45Q in a manner that does justice to the provision’s

heritage in the SOE case requires rejection of Mr Goddard’s technical arguments that

when selling shares the Crown is not acting pursuant to Part 5A, so that s 45Q does

not apply. Giving meaningful effect to s 45Q requires a realistic approach to the

legislative scheme that governs the sale of shares in mixed ownership companies.

Part 5A effectively permits the Crown to do something with the shares which

currently is prohibited. As an action permitted to that extent by Part 5A, a sale of

shares must be conducted in accordance with s 45Q.

[64] We therefore hold that s 45Q does render reviewable the proposed sale of

shares in Mighty River Power by the Crown, for compliance with the principles of

the Treaty.

Alternative submission: s 22(3)

[65] We mention for the sake of completeness an alternative submission advanced

by Mr Carruthers, based on s 45Q and s 22(3) of the State-Owned Enterprises Act, a

provision incorporated into Part 5A by s 45W(1). Section 22(3) reads as follows,

when modified as required by s 45W(1):

Each shareholding Minister may exercise all the rights and powers attaching

to the shares in a [mixed ownership company] held by that Minister.

[66] Mr Carruthers submitted that one of the powers attaching to the shares in

Mighty River Power was the power to sell them. Section 45Q would therefore

operate to prevent that act if the proposed exercise of the power was inconsistent

with the principles of the Treaty.

[67] Mr Goddard submitted the appellants’ argument misunderstood the purpose

and effect of s 22 of the State-Owned Enterprises Act. That section, he submitted,

did not confer any powers in relation to shares on any person. The function of s 22

was to identify who held the shares in a State enterprise and who can exercise the

rights and powers conferred on the holder of the shares by the Companies Act 1993.

[68] We do not need to rule on that alternative submission as we are satisfied the

appellants’ principal submission as to the effect of s 45Q is correct.

Is Cabinet’s decision to bring into effect the State-Owned Enterprises

Amendment Act reviewable?

[69] We have explained above why Parliament, while providing for the immediate

commencement of the Mixed Ownership Amendment Act,65

left it to the Executive

to determine when the State-Owned Enterprises Amendment Act should come into

force. The four State enterprises earmarked for sale were to remain subject to the

State-Owned Enterprises regime until such time as the Government determined the

shares in them should be sold.

Submissions of the parties

[70] We set out briefly the respective submissions of the parties on this issue.

Mr Carruthers submitted that the Crown should be able to sell shares in Mighty

River Power only if it could do so in a Treaty-compliant manner. He submitted that

the proposed sale was not Treaty-compliant, with the consequence that not only the

sale should be prevented (pursuant to s 45Q) but also the Act transferring Mighty

River Power to the mixed ownership companies regime (the State-Owned

Enterprises Amendment Act) should not be brought into force until such time as the

65

Section 2.

Crown could demonstrate a Treaty-compliant sale programme. He further submitted

that a special consideration in this case was the fact that the Crown, with respect to

Mighty River Power, is already subject to Treaty obligations by s 9 of the State-

Owned Enterprises Act. He developed an argument in this regard that, because 23 of

the Interpretation Act 1999 provides that “an amending enactment is part of the

enactment that it amends”, the commencement of the State-Owned Enterprises

Amendment Act is subject to the Treaty obligations contained in s 9 of the principal

Act.

[71] The Crown does accept that an Order in Council providing for the

commencement of primary legislation is made in the exercise of a statutory power

and therefore capable of review by the courts.66

However, Mr Goddard submitted

(and we accept) that the courts should ensure that there is not “an unwarrantable

intrusion into the function of Parliament”.67

[72] The Crown does not accept that s 9 of the State-Owned Enterprises Act

applies to the commencement power contained in the State-Owned Enterprises

Amendment Act and submits that the appellants’ argument to the contrary is

inconsistent with the purpose of s 23 of the Interpretation Act.

[73] Mr Goddard submitted that, in the absence of specific applicable legislation

in the form of s 9, it cannot reasonably be argued that the principles of the Treaty

must be complied with or that they are a mandatory relevant consideration when the

Executive fixes a date on which primary legislation comes into force. It submits that

this would be tantamount to giving the courts and the Executive the function of

reviewing the substance of primary legislation, which is inconsistent with

New Zealand’s constitutional arrangements.

[74] The Crown further submitted that, as in the Commercial Radio Assets case, the

underlying contention of the appellants is that the mixed ownership model legislation

66

Commercial Radio Assets case, above n 53 at 164. 67

Commercial Radio Assets case, above n 53, at 165. See also R v Secretary of State for the Home

Department, ex parte Fire Brigades Union [1995] 2 AC 513 (HL), in particular the speeches of

Lord Browne-Wilkinson at 550–551 and Lord Nicholls at 574–575.

itself is inconsistent with Treaty obligations.68

A review of the policy of legislation

is outside the function of both the Executive and the courts.

Our assessment on the commencement issue

[75] For reasons we can explain shortly, we are satisfied that the only thing that

occurs on the commencement of the mixed ownership model legislation is the

transfer of companies from the State enterprise regime to the mixed ownership

model regime. Because of the seamless application of ss 9 and 45Q, the mere

transfer of the companies from the State enterprise regime to the mixed ownership

model regime does not alter the Crown’s obligations to act in accordance with the

Treaty.

[76] Section 9 of the State-Owned Enterprises Act applies while the companies

remain State enterprises and s 45Q, which is in the same terms, applies when they

become mixed ownership companies. It is true that s 45Q only applies to Crown

acts and not to the acts of the company or any third party shareholders once any sale

has taken place. But, for the reasons we have given, we are satisfied that s 45Q

applies to the sale of shares by the Crown.69

Further, if a share sale does not take

place in relation to any particular company, then it can be returned to the State

enterprise regime under Part 5A.70

[77] In these circumstances, the real issue in this case is whether or not the sale of

shares will be Treaty-compliant. This is discussed below. We do not need to

consider the commencement issue further.

Was the Crown in breach of s 64 of the Waikato-Tainui Raupatu Claims

(Waikato River) Settlement Act 2010?

[78] The Settlement Act recorded a settlement with respect to the Waikato River.

The overarching purpose of the settlement was to “restore and protect the health and

68

Commercial Radio Assets case, above n 53, at 166. 69

At [63]–[64] above. 70

See Public Finance Act 1989, s 3C.

wellbeing of the Waikato River for future generations”.71

The Act gave effect to the

settlement of raupatu claims under a deed between the parties dated 17 December

2009.72

It provided for co-management arrangements for the river.73

[79] It is section 64 which is in contention in this case. It reads as follows:

64 Creating or disposing of interests

(1) The Crown and Waikato-Tainui acknowledge that—

(a) they have different concepts and views regarding

relationships with the Waikato River (which the Crown

would seek to describe as including “ownership”):

(b) the 2009 deed and this Act are not intended to resolve those

differences:

(c) the 2009 deed and this Act are primarily concerned with

management of the Waikato River to—

(i) achieve the overarching purpose of the settlement:

(ii) recognise the special relationship of Waikato-Tainui

with the Waikato River.

(2) This section applies if the Crown, a Crown entity, a state

enterprise, or a mixed ownership model company proposes doing

any of the following actions in relation to a property right or

interest in the Waikato River:

(a) creating it:

(b) disposing of it:

(c) starting a statutory or other process to create it:

(d) starting a statutory or other process to dispose of it.

(3) The Crown, Crown entity, state enterprise, or mixed ownership

model company must engage with Waikato-Tainui in accordance

with the principles described in the Kiingitanga Accord before

doing the action.

(4) In subsection (2), dispose of or create a property right or

interest,—

(a) in relation to a Crown entity or state enterprise, includes

only activities—

71

Waikato-Tainui Raupatu Claims (Waikato River) Settlement Act 2010, s 3. 72

Section 4(a). 73

Section 4(g).

(i) that relate to an asset held by that entity or enterprise;

and

(ii) the nature of which is such that the entity or

enterprise would either in the ordinary course, or as a

result of a statutory requirement or under a statement

of intent or otherwise, consult with the responsible

Minister or the shareholding Ministers, as the case

may be; and

(aa) in relation to a mixed ownership model

company, includes only activities that

relate to an asset held by that company;

and

(b) does not include—

(i) any decision in relation to which consideration is

required to be given to the vision and strategy under

section 17; or

(ii) any decision relating to a permit under the Crown

Minerals Act 1991.

[80] Mr Carruthers submitted that the Crown, before pursuing the sale, was

required to engage with Waikato-Tainui in accordance with the principles described

in the Kiingitanga Accord and it had failed to do so. Ronald Young J rejected this

argument. He held that the Crown, by proposing to sell the shares in Mighty River

Power, was not starting a “statutory process to dispose of a property right or interest

in the Waikato River”.74

Mr Carruthers submitted that the Judge’s interpretation of

s 64 was “too narrow and technical”.

[81] Section 64 is part of the provisions dealing with redress in relation to “certain

assets”.75

We accept that the water permits used by Mighty River Power are

properly regarded as interests in the Waikato River (differing in this from the

position taken in the High Court in reliance on the fact that s 122 of the Resource

Management Act provides that resource consents, of which water permits are a kind,

are not property). They were “assets” within the definition of the State-Owned

Enterprises Act,76

as the Crown acknowledged, and passed to the State enterprise

that became Mighty River Power. For the purposes of the Settlement Act, they may

74

High Court judgment, above n 6, at [334]. 75

A purpose of the Act identified in s 4(h). 76

State-Owned Enterprises Act 1986, s 29(1)(e).

well be “property” and are in our view certainly an “interest” caught by s 64. If

excluded from the application of s 64, it is difficult to see what could be within the

meaning of “certain assets” (in the heading to the part containing s 64) or an

“interest” in the Waikato River (referred to in the text of s 64), of concern to the

negotiating parties and able to be created by a statutory or other process.77

The

difficulty for the appellants lies not in whether or not water rights are property rights

or interests in the Waikato River, but in whether the IPO constitutes a disposal by the

Crown of any such property rights or interests held by it.

[82] We are unable to accept that the partial privatisation of Mighty River Power

constitutes disposal of property or interests held by the Crown in the river. The

rights and the associated land in the river bed held by Mighty River Power (which

are undoubtedly “property”) are not being disposed of and will continue to be held

by it. Should Mighty River Power wish to dispose of such interests, it is obliged to

engage with Waikato-Tainui in accordance with the principles in the Kiingitanga

Accord before doing so. The purpose of the settlement is not affected by the change

in the ownership of Mighty River Power which, as a mixed ownership company, is

bound by the provisions of s 64. It is not a technical interpretation of the legislation

to accept that the holder of the interest in the river is not disposing of its interest.

Nor is there any basis for treating the Crown as the owner of assets it has transferred

under the provisions of the State-Owned Enterprises Act.

The adequacy of the consultation following the Freshwater Report

[83] It is not in contention that, following the recommendations of the Waitangi

Tribunal in its interim report on Freshwater, it was necessary for the Crown to

consult further with Maori. And that is what happened. The appellants argue that

the consultation was too rushed. But that was in accordance with the Waitangi

Tribunal’s recommendation. The Tribunal was mindful of the urgency for the

Government in implementing the privatisation and, for that reason, recommended a

single national hui, urgently convened.78

77

The Waikato-Tainui Raupatu Claims (Waikato River) Settlement Act 2010, s 64(2)(c). 78

Freshwater Report, above n 11, at [3.9.4].

[84] It was also suggested that the scope of the consultation was too narrow. But

that, too, was in accordance with the Waitangi Tribunal’s recommendation which,

while opening up the possibility of wider engagement, was careful not to be

prescriptive. While it left to Crown and Maori the option of widening the scope of

the consultation, the Tribunal indicated that the narrower consultation on “shares

plus” would suffice to meet its recommendation.79

[85] Although the Waitangi Tribunal is not to be criticised in the circumstances of

this urgent report, it is also relevant in assessing the adequacy of the engagement that

some of the ideas it floated as possibilities for the discussion raised very large

questions which could not properly or responsibly have been addressed by the

parties in the limited time the Tribunal acknowledged to be available. They are

questions that the Tribunal will consider in the second stage of its Freshwater

inquiry. And the Deputy Prime Minister was well justified in the view that rushing

such significant issues is not the way to lead to sustainable solutions to important

matters that have vexed New Zealand society since earliest days.

[86] It has also been suggested that the consultations were an empty exercise in

which the outcome was pre-determined. In considering this submission, it has to be

acknowledged that the Tribunal’s “shares plus” idea was a concept only. Questions

of feasibility were not sufficiently ventilated in the Waitangi Tribunal processes.

Indeed, the idea was not one developed by the claimants, who argued that the

privatisation should not proceed until Maori interests in the waters used were

ascertained and addressed. In those circumstances, it was appropriate for the Crown

to consult with Maori to find out whether they indeed wanted a solution in the

“shares plus” mould, and to test the feasibility of the proposal both through

consultation and by obtaining advice from officials.

[87] The fact that the Crown ultimately rejected the Waitangi Tribunal suggestion

as inappropriate is not a basis from which it can be inferred that the consultation was

empty or pre-determined. Indeed, this complaint is difficult to separate out from the

substantive issue of Treaty compliance in the privatisation. If the Crown was

justified in considering that the privatisation did not set up an impediment to

79

As discussed above at [26].

recognition of Maori interests in water, it is difficult to infer that the consultation

was inadequate simply from the fact that the idea of “shares plus” was rejected and

there was no change in the Crown’s proposal as a result. For these reasons, we

consider there is nothing in the consultation point that is not resolved with the

substantive issue of whether the sale of shares was consistent with the principles of

the Treaty.

Is the proposed sale of shares in Mighty River Power consistent with the

principles of the Treaty of Waitangi?

What is the test?

[88] In the Broadcasting Assets case,80

the Privy Council identified the test to be

applied for deciding whether a proposed transfer of assets to a State enterprise would

breach s 9 of the State-Owned Enterprises Act:81

The answer depends on whether the transfer of the assets could now or in

the foreseeable future impair, to a material extent, the Crown’s ability to take

the reasonable action which it is under an obligation to undertake in order to

comply with the principles of the Treaty.

In the same case the Privy Council also said:82

Section 9 is not a statutory provision which requires the Crown to establish,

as Miss Elias argues, as precedent fact, that the transfer would not be

inconsistent with the principles of the Treaty. The decision in Khera v

Secretary of State for the Home Department [1984] AC 74, on which she

relied, was dealing with a different situation where the Crown’s conduct

would be unlawful except in a case of an illegal entrant so the Crown had to

establish that their actions related to an illegal entrant. Here, on the other

hand, the conduct of the Crown was only not permitted if it fell foul of s 9;

accordingly, the onus was on the appellants to show that the transfer was not

permitted in the normal manner. But, as is usually the situation, the outcome

of this case does not depend on any question of onus of proof. Equally the

Solicitor-General and the majority of the Court of Appeal (if this is what

they were saying, which is by no means clear) were mistaken in suggesting

that as the question of the manner in which the Crown chooses to fulfil its

obligations under the Treaty is a matter of policy the Court has no power to

intervene unless the Court is satisfied that the policy is unreasonable in a

Wednesbury sense. The question is a matter on which the Court must form its

own judgment on the evidence before the Court.

80

Broadcasting Assets case (PC), above n 46. 81

At 519. 82

At 524.

[89] In deciding whether proposed Crown action will result in “material

impairment”, a court must assess the difference between the ability of the Crown to

act in a particular way if the proposed action does not occur and its likely post-action

capacity. So impairment of an ability to provide a particular form of redress which

is not in reasonable or substantial prospect, objectively evaluated, will not be

relevantly material.83

To decide what is reasonable requires a contextual evaluation

which may require consideration of the social and economic climate. As the Privy

Council pointed out:84

While the obligation of the Crown is constant, the protective steps which it is

reasonable for the Crown to take change depending on the situation which

exists at any particular time. For example in times of recession the Crown

may be regarded as acting reasonably in not becoming involved in heavy

expenditure in order to fulfil its obligations although this would not be

acceptable at a time when the economy was buoyant.

As well, where the capacity to provide a particular form of redress will be materially

impaired, the courts must also consider whether the Crown will nonetheless have the

capacity to provide other forms of redress which are equally effective.

[90] On this basis:

(a) Before intervening, the Court must be brought to the conclusion that

the proposed privatisation is inconsistent with Treaty principles;

(b) There will be inconsistency, if the proposed privatisation would

“impair, to a material extent, the Crown’s ability to take the

reasonable action which it is under an obligation to undertake in order

to comply with the principles of the Treaty”; and

(c) The Court must address this issue directly and form its own judgment,

along the lines discussed in [89].

83

The expression, “substantial prospect”, comes from the judgment of Cooke P in Te Runanganui

o Te Ika Whenua Inc Society v Attorney-General [1994] 2 NZLR 20 (CA) [Te Ika Whenua] at 27. 84

Broadcasting Assets case (PC), above n 46, at 517.

[91] We also mention at this stage the United Nations Declaration on the Rights of

Indigenous Peoples,85

which was affirmed by New Zealand in April 2010.86

Mr Carruthers relied on art 28(1) of the Declaration, which reads as follows:

Indigenous peoples have the right to redress, by means that can include

restitution or, when this is not possible, just, fair and equitable

compensation, for the lands, territories and resources which they have

traditionally owned or otherwise occupied or used, and which have been

confiscated, taken, occupied, used or damaged without their free, prior and

informed consent.

[92] We do not find it necessary to consider the Declaration further. We doubt if

the Declaration adds significantly to the principles of the Treaty statutorily

recognised under the State-Owned Enterprises Act and Part 5A of the Public Finance

Act. We accept, however, that the Declaration provides some support for the view

that those principles should be construed broadly. In particular, it supports the claim

for commercial redress as part of the right to development there recognised.

The underlying claims

[93] The appellants maintain that there are a number of claims to the Waitangi

Tribunal of Treaty breach in respect of waters (some already the subject of Waitangi

Tribunal reports that they are well-founded, others still to be heard) which may be

affected adversely by the proposed privatisation. These claims have been reviewed

at length by the Tribunal in its Freshwater Report87

and in the High Court judgment

of Ronald Young J.88

They have also been discussed earlier in this judgment. Most

claims invoke the jurisdiction of the Waitangi Tribunal to recommend to the Crown

how its Treaty obligations may be discharged, including by reparation. These claims

85

United Nations Declaration on the Rights of Indigenous Peoples GA Res 61/295, A/Res/61/295,

(2007). 86

(20 April 2010) 662 NZPD 10229–10240. 87

Freshwater Report, above n 11. 88

High Court judgment, above n 6.

under the statutory jurisdiction of the Tribunal are the most significant89

for present

purposes.90

In addition to the claims which invoke the statutory jurisdiction of the

Waitangi Tribunal, existing or foreshadowed claims to waters include claims of right

addressed to the courts based on aboriginal title and breach of fiduciary duty.

[94] All Waitangi Tribunal claims relate to one or more of the following

complaints: (a) the wrongful use of the claimants’ waters, and associated land, (b)

the circumstances and manner in which the claimants were dispossessed of waters

and associated land, (c) the effect of Crown action (or inaction) on the waters and the

surrounding environment, and (d) past and future management of geothermal

resources and, in the case of rivers, the exclusion of Maori from their development,

governance and management by legislation and Crown actions including the Water-

power Act 1903, the Water and Soil Conservation Act 1967 and the Resource

Management Act.

Evolution of statutory regimes controlling the use of water

[95] From 1903, the sole right to use water to generate electricity was vested by

legislation in the Crown.91

The Water-power Act made provision for delegation of

the right to local authorities.92

The Water and Soil Conservation Act extended the

vesting in the Crown of the right to take natural water or dam rivers or streams for all

purposes, except for domestic and stock consumption and for fire-fighting.93

The

power to grant consents was exercised by Regional Water Boards. The legislation

made no mention of Maori interests in water or connections with waters of

significance to Maori.94

Only in 1983 was the legislation amended to provide that

one member of the National Water and Soil Conservation Authority was to be

89

Freshwater Report, above n 11, at [1.2] and [2.2]. 90

In most cases, the function of the Tribunal is recommendatory only and the Crown can decide

whether or not to accept the recommendations. Under s 27B of the State-Owned Enterprises

Act, however, land which has passed to state enterprises must be compulsorily returned to Maori

if the Tribunal so recommends. Claims to waters often include associated claims to land in

respect of which the powers under s 27B are available. 91

Water-power Act 1903, s 2(1). 92

Section 3. 93

Water and Soil Conservation Act 1967, s 21(1). 94

Huakina Development Trust v Waikato Valley Authority [1987] 2 NZLR 188 (HC).

appointed following consultation with the Minister of Maori Affairs “to represent the

interests of the Maori people in relation to natural water”.95

[96] The Water and Soil Conservation Act has been the subject of claims of

breach to the Waitangi Tribunal since it was set up in 1975.96

It was the legislation

in effect in 1987 when the SOE case was decided.

[97] The Resource Management Act provides that the maximum term for which a

water right can be granted is 35 years.97

In addition, the Act provides important

recognition for Maori connection to waters and to lands of significance to them in

decision-making under the Act. Section 6 of the Act lists “matters of national

importance” which all persons exercising powers and functions under the Act are to

“recognise and provide for”. The list includes “the relationship of Maori and their

culture and traditions with their ancestral lands, water, sites, waahi tapu, and other

taonga”. Under s 7 all those exercising powers and functions under the Act are

required to have “particular regard” to kaitiakitanga.98

By s 8 of the Act all persons

exercising powers and functions under it are required to “take into account the

principles of the Treaty of Waitangi (Te Tiriti o Waitangi)”. This Act substantially

improved the recognition of Maori in relation to the management of waters.

[98] The Act was amended in 2005 to strengthen the role for Maori by creating an

obligation to consult with tangata whenua in the preparation of a proposed policy

statement or plan if they may be affected by the policy statement or plan.99

A further

amendment provided for public authorities and iwi to enter into joint management

agreements under which decisions taken have the legal effect of a decision of the

local authority.100

In addition, local authorities now must have regard to planning

documents of iwi authorities in the preparation of their own plans and policy

statements.101

Regional policy statements must set out the resource management

95

Water and Soil Conversation Act 1967, s 5(1)(c)(iv). 96

See, for example, The Whanganui River Report, above n 10, at 255. 97

Resource Management Act 1991, s 123(d). 98

Defined as “the exercise of guardianship by the tangata whenua of an area in accordance with

tikanga Maori in relation to natural and physical resources; and includ[ing] the ethic of

stewardship”: Resource Management Act 1991, s 2, definition of “kaitiakitanga”. 99

Schedule 1, cl 3(1)(d). 100

See s 2, definition of “joint management agreement”, and ss 36B–36E. 101

Sections 61(2A), 66(2A) and 74(2A).

issues of significance to the region’s iwi authorities.102

There is also provision under

the Act for local authorities to transfer functions to iwi authorities after following a

requirement of special consultation under the Local Government Act 2002.103

In

addition to enhanced direct authority under the Act, the recognition of the special

place of iwi enables Maori to participate from a position of some strength when

waters of significance to them are affected. Whether this is sufficient to discharge

the Treaty obligations in modern circumstances will no doubt be the subject of

consideration by the Waitangi Tribunal in the second stage of its Freshwater inquiry.

Positions of the parties as to ownership interests in water

[99] The Crown’s general negotiating stance has been set out in what is known as

the “Red Book”, a publication to inform Maori about the settlement process. To date

the Crown has not been willing to negotiate for recognition of Maori property in

water or for commercial redress in relation to any interference with it in the

development of generating capacity. The relevant passage in the Red Book is as

follows:104

New Zealand law does not provide for ownership of water in rivers and

lakes

As noted earlier, the Crown acknowledges that Maori have traditionally

viewed a river or lake as a single entity, and have not separated it into bed,

banks and water. As a result, Maori consider that the river or lake as a whole

can be owned by iwi or hapu, in the sense of having tribal authority over it.

However, while under New Zealand law the banks and bed of a river can be

legally owned, the water cannot. This reflects the common law position that

water, until contained (for example, put in a tank or bottled), cannot be

owned by anybody. For this reason, it is not possible for the Crown to offer

claimant groups legal ownership of an entire river or lake – including the

water – in a settlement.

The Crown also considers that the benefits of hydro-electricity generation

belong to all New Zealanders and it does not provide compensation for any

past interference with rivers for these purposes. However, negotiations can

explore redress options for specific grievances relating to rivers or lakes such

as the flooding or destruction of wahi tapu or effects on traditional fisheries

that arise from Crown actions.

102

Section 62(1)(b). 103

Local Government Act 2002, s 83. 104

Office of Treaty Settlements Settlement Redress at 111.

[100] The stance set out in the second of the two cited paragraphs is consistent with

the approach taken in the judgment of the Court of Appeal in Te Ika Whenua,105

which diverges somewhat from that taken by the Waitangi Tribunal.106

The

Tribunal’s position is that claimants may be entitled to commercial redress for the

use of rivers for electricity generation and that this might be in the form of both

compensation for past losses107

and royalties for future use.108

It takes the same view

in respect of geothermal resources.109

[101] In submissions to the Waitangi Tribunal and in the course of the hearings in

the High Court and this Court, the Crown accepts that some hapu will have interests

in particular waters and that their interests are protected by art 2 of the Treaty.110

Counsel confirmed the position taken by the Crown before the Tribunal (in what

may be a development of the view expressed in the Red Book and adopted in the

historic settlements) that it is “open to discussing the possibility of Maori proprietary

rights in water, short of full ownership”. Such interests are however unascertained,

including as to their nature and extent. How they may be given effect in modern

conditions consistently with Treaty responsibilities and other government obligations

is also far from clear. For their part, the appellants accept that use patterns

established since 1840 and modification of particular waters through development

(especially since the development of hydro-electricity generating capacity from the

beginning of the 20th century) necessarily impacts upon what interests can

reasonably be available to them by way of reparation for Treaty breach.

An overview of the competing positions as to the extent of available Treaty claims

[102] The appellants’ position before us, corresponding to that of the claimants

before the Tribunal in the Freshwater Report, is as follows. As at 1840, they had

rights in relation to waters (including lakes and rivers) and geothermal energy which

105

Te Ika Whenua, above n 83. At 26, the judgment also refers to the view of Maori that a river is

“a whole and indivisible entity, not separated into bed, banks and waters” but does not discuss

common law rules as to the ownership of water. 106

See in particular Freshwater Report, above n 11, and Te Ika Whenua Rivers Report, above n 10. 107

Freshwater Report, above n 11, at [3.9.1] and Te Ika Whenua Rivers Report, above n 10, at

[10.4]. 108

Freshwater Report, above n 11, at [3.8.3(1)]. 109

He Maunga Rongo: Report on Central North Island Claims, above n 11, at 1590 and following. 110

See Freshwater Report, above n 11, at [2.3].

were guaranteed under art 2 of the Treaty and were broadly equivalent to ownership.

In breach of the Treaty, the Crown, via the Water-power Act, the Water and Soil

Conservation Act and the Resource Management Act, has exercised control and

management of rivers and lakes without their consent. As a result, their waters have

not only been significantly affected to their detriment (involving environmental

degradation and loss of, or interference with, customary uses), but the appellants

have also been deprived of the ability to develop them for their own purposes and

they have not derived any direct financial benefit from their exploitation. Broadly

similar claims are made in relation to geothermal waters. Claims to share in the

economic benefits from use of waters are part only of the claims. They include

claims for cultural and spiritual deprivation, as we have already explained.111

[103] The Crown acknowledges that Maori have interests and rights in relation to

particular waters. It has not been prepared, so far, to negotiate for recognition of

Maori property in waters or for their participation in the economic benefits obtained

from the use of waters (as through royalties paid to them).112

It is, however,

prepared to encourage and facilitate joint ventures in the generation of electricity

using waters in which Maori are interested in the future. It is also prepared to

negotiate co-governance and co-management arrangements under which Maori have

a substantial say in the control of particular rivers through Treaty settlements.113

As

well, the future of freshwater management (and thus the Resource Management Act)

has been under active review pursuant to a process known as Fresh Start For Fresh

Water conducted by the Land and Water Forum. This has included extensive

consultation with Maori. There are also parallel discussions between government

ministers and the Freshwater Iwi Leaders Group.

[104] Although the Crown’s general negotiating stance is against the recognition of

ownership interests or the provision of commercial redress in respect of existing

generating capacity and its future use, the Crown has undertaken that it will not rely

on the privatisation of the generating companies so as to diminish any claimed

111

See above at [10]. 112

See Freshwater Report, above n 11, at [3.6.2(2)] where the Crown witness is recorded as saying

that such royalties are not “on the table”. 113

For instance in relation to the Waikato River through the Waikato River Authority, and in

relation to the Rangitaiki River through the Rangitaiki River Forum.

rights. This position was set out in a letter of 21 February 2012 from Ministers to

the Tribunal:

…

The Crown wishes to acknowledge and confirm to the Waitangi Tribunal and

to iwi and Maori that the sale of the shares is not intended to prejudice the

rights of either iwi or Maori, or the Crown, in the natural resources used by

those mixed ownership companies. Government does not consider the

legislation will affect any rights or interest in water or other natural resources

used in the generation of electricity or affected by such use, including lakes,

rivers, and the associated waters, beds and other parts, or geothermal

resources.

Government confirms here that in relation to claims to the Crown about such

rights and interests, Government will not seek to rely on the changed status

from SOE to mixed ownership [to suggest] any diminution in the claimed

rights.

The Crown also confirms that as the majority shareholder in the mixed

ownership companies, it will continue to exercise its Treaty obligations to

iwi. The Government is intending that the legislation to implement the

mixed ownership model include a provision which reflects the concepts of

section 9 of the State-Owned Enterprises Act.

…

[105] The Deputy Prime Minister and the Attorney-General have given additional

assurances in the affidavits filed in these proceedings. In the case of the Deputy

Prime Minister these assurances include expressions of confidence that the mixed

ownership companies programme will not compromise the Government’s “work to

achieve recognition of and redress for Maori rights and interests in water and

geothermal resources”114

and confirmation that the programme (including any

potential sale to foreign investors) will not have any “chilling effect” on the

willingness of the Crown to provide appropriate rights recognition and redress.115

The Attorney-General, in his affidavit stated:116

I have been satisfied that, however the rights and interests of Maori in water

and geothermal resources may be defined …, the sale of minority

shareholdings in the [mixed ownership] companies will not compromise the

Crown’s ability to recognise those rights and interests, will not compromise

the Crown’s ability to respond appropriately to the outcomes of the Waitangi

Tribunal’s work in this area, and will not change my commitment as

Minister, and the Crown’s commitment, to make provision for past actions

114

As contained at [44] of the affidavit of the Deputy Prime Minister of 7 November 2012. 115

At [50] of the same affidavit. 116

At [4] of the affidavit of the Attorney-General of 7 November 2012.

that are inconsistent with those rights and interests through redress provided

in Treaty settlements.

Treaty settlements involving water

[106] Despite what may seem to be differences between the negotiating stances on

ownership issues of the Treaty partners, a number of settlements of historic

grievances with iwi have addressed their connections with specific waters. Such

settlements in recent years have included legislative and Crown acknowledgement of

specific Maori relationships to waterways, lakes, and springs, and by specific

provision for Maori participation in management of such features.

[107] Of particular importance in relation to Mighty River Power, the long-

standing Waikato-Tainui Raupatu Treaty claims in respect of the Waikato River

have received substantial redress under the terms of the Settlement Act, to which we

have referred. Although the water rights held by Mighty River Power are not

confined to the part of the river affected by the Act, the Act illustrates the extent to

which the Crown has so far recognised and provided for Maori interests in waters of

significance. It also illustrates the range of mechanisms available to the Office of

Treaty Settlements under present policies to address historical Treaty breaches.

[108] Of importance in relation to the present litigation is the position recorded in

s 64 of the Act, reflecting an approach to date consistently maintained by the Crown

in respect of dealings with other iwi and hapu, that Crown and Waikato-Tainui:117

have different concepts and views regarding relationships with the Waikato

River (which the Crown would seek to describe as including

“ownership”): …

[109] The Act is “not intended to resolve those differences” but is, rather,

“primarily concerned with management of the Waikato River to achieve the

overarching purpose of the settlement and recognise the special relationship of

Waikato-Tainui with the Waikato River”.118

The “overarching purpose of the

settlement” is defined in s 3 as being “to restore and protect the health and wellbeing

of the Waikato River for future generations”.

117

Waikato-Tainui Raupatu Claims (Waikato River) Settlement Act 2010, s 64(1)(a). 118

Section 64(1)(b)–(c).

[110] In the Act, the Crown undertakes to work for “a settlement that will

recognise and sustain the special relationship of Waikato-Tainui with the Waikato

River”,119

which is defined to include the “body of water” itself.120

The Act provides

a “vision and strategy” statement121

for the river, which is deemed to be part of the

Waikato Regional Policy Statement and which prevails in cases of inconsistency

before the Regional Policy Statement can be amended, as it must be to ensure

conformity.122

Under the Act, any person exercising powers or carrying out

functions in relation to the Waikato River or its catchment is obliged to have

“particular regard” to the vision and strategy framework.123

Under s 64 of the Act,

whenever a mixed ownership company proposes, in relation to an asset held by the

company, to create or dispose of an interest in the Waikato River (including by

“starting a statutory or other process”), it is required to “engage with Waikato-Tainui

in accordance with the principles described in the Kiingitanga accord”.124

The Act

also contains obligations of co-management of sites of particular significance such as

wahi tapu.

[111] Comparable settlements and legislation have been entered into with other iwi

and hapu. They include settlements with Ngati Manawa (2012), Ngai Tamanuhiri

(2012), Raukawa (2012), Ngati Pahauwera (2010) and in respect of Tapuika (2012).

In none is there Crown agreement on Maori claims of ownership interests in water.

All concern management of use and access to waters and recognition of the special

connection of Maori.

[112] In explanation of the mechanisms available to the Office of Treaty

Settlements (and which are manifested in the Settlement Act), the Deputy Prime

Minister explained that the framework includes “acknowledgment of mana,

rangatiratanga, and kaitiakitanga” and “[t]he provision of redress that, despite being

in settlement of historical claims, is contemporary in nature, forward looking and

[providing for] on-going rights and interests”.125

119

Preamble, cl (17)(n). 120

Section 6, definition of “Waikato River”. 121

Section 9. 122

Section 11. 123

Section 17(3). 124

Section 64(3). 125

Affidavit of the Deputy Prime Minister, above n 114, at [42].

[113] Recognition of Maori interests in water is clearly still a work in progress. In

his evidence to the High Court, the Deputy Prime Minister relied on the existing

framework for Treaty settlements and the initiatives underway to review the

regulation of freshwater (including through the Waitangi Tribunal inquiry) as part of

the Crown’s overall and ongoing response to Treaty claims. That process, which has

clearly accelerated in recent years, is the context in which the materiality of the

change in ownership of Mighty River Power must be assessed.

Treaty principles and the SOE case

[114] The appellants relied heavily on the SOE case.126

They say that the Crown is

to be treated as the owner of the assets transferred to the State enterprises, despite the

corporate form adopted. They maintain that the sale of up to 49 per cent of the

shares in the generating companies would fundamentally change the relationship

between the Crown and the generating companies, and in particular limit the

Crown’s ability to provide appropriate redress for Maori through providing for their

participation in the State enterprise or distribution to them of the assets under claim.

Accordingly, on the appellants’ argument, we should treat the SOE case as directly

applicable.

[115] Assessment of “material impairment” (the test later used by the Privy

Council, as set out above at [88]127

) was relatively easy to infer when the proposed

Crown action clearly had the potential to put beyond Maori claim particular or

substituted land which they wished to resume. It is not quite so easy where what is

to be sold is a minority stake in Mighty River Power rather than the assets which are

primarily subject to Treaty claims. The Crown will retain substantial capacity to

provide redress in the form of shares, if that is seen as appropriate. The Crown will

retain at least 51 per cent of the shares and therefore majority control over the

company. And, to the extent that the generating assets include land, they remain

subject to the resumption regime. As well, and to anticipate a point which will

shortly be made, in the current legal and social environment, Maori can be confident

126

SOE case, above n 25. 127

Broadcasting Assets case (PC), above n 46, at 519. Their Lordships referred to impairment “to a

material extent”.

that their claims will be addressed, something which was not as clear in 1987 as it is

now.

How the privatisation of the power-generating companies might impair the ability of

the Crown to respond to claims – the contentions of the parties

[116] The position of the appellants is that the power-generating companies have

acquired their wealth by using taonga (water resources) in which Maori claim

proprietary interests, in some cases extending to claims of outright ownership. They

see the existence and operation of those companies as directly resulting from

breaches of Treaty principles.

[117] The appellants maintain that, before considering issues of compensation, the

Crown must, to the greatest extent possible, strive to recognise the mana (authority),

take noho (use) and kaitiakitanga (care) of the respective hapu and iwi in their water

resources. This involves recognising the cultural and spiritual relationship between

local Maori and the specific water resource, as well as recognising the economic

aspects of that relationship, including development and exploitation rights in relation

to those water resources. The appellants say that mana endowed the holder with

authority over the water resource, including the right to charge for the use of it.

They consider that the introduction of such charges (or other recognition of their

mana) would face an impossible hurdle once third parties become shareholders in the

generating companies.

[118] The appellants argue that, in the absence of the outright return of the water

resources, proper redress must involve some utilisation of the power-generating

companies themselves or their assets (and, in particular, use rights to water).

Without such utilisation, Maori claims will be able to be met only through financial

compensation which will continue the alienation from their tupuna awa and other

waters. They say that financial compensation would be an inadequate recognition of

their Treaty rights and the right to development implicit in the guarantee of their

property as recognised by the United Nations Declaration of the Rights of

Indigenous Peoples. So they say that until their claims are ascertained by the

Waitangi Tribunal in its Freshwater inquiry and the Crown has made any reparation,

the Crown should retain the capacity to allow them to obtain redress through

participation in the ownership of the developments that have been imposed upon

them.

[119] The appellants also suggest that the power-generating companies provide a

mechanism by which compensation might be provided for Treaty breaches with

regard to water resources, even where such breaches are not directly associated with

power-generating capacity. As well, the appellants have a broader concern. They

say that partial privatisation of the power companies will make it more difficult to

implement general reform in relation to the management of water resources.

Requiring users of water to pay for its use is likely to be opposed by those users.

The partial privatisation of the power-generating companies will substantially

increase the number of those who could be expected to voice such opposition.

[120] The appellants argue that the shares should not be sold until a system of

protection is introduced, which is comparable to the memorials and resumption

provisions in respect of lands that followed the SOE case.

[121] The Crown contends that privatisation is neutral in its effect on the Treaty

claims and will not prevent the Crown responding appropriately to remedy breaches

of established interests in water. As well, counsel for the Crown in oral argument

maintained that the existing regulation of water (which includes the use regime

established by legislation and the limit on duration of water rights imposed following

the SOE case) was indeed comparable to the protection through memorialisation of

land.

The views of the Waitangi Tribunal

[122] We have already discussed the interim report of the Waitangi Tribunal in the

Freshwater Report,128

but there are aspects of the report which warrant particular

reference in the present context.

128

See above at [21]–[26].

[123] The first is the summary which the Tribunal provided of the framework for

rights recognition advanced by the claimants. This involved three components:129

(a) Shares in the generating companies, involving either (i) a “swap” of

ownership rights in the rivers for shares in the companies, or (ii) a

“shares plus” arrangement giving successful claimants shares with

enhanced rights of control.

(b) “Modern water rights” – meaning the establishment of a new water

control regime under which Maori have power to issue water permits

(becoming in effect the consent authorities) or may be allocated water

permits which they could lease on to power-generating companies.

(c) A royalty regime under which Maori were paid royalties for the use of

water.

[124] Secondly, some of the claimants’ assertions as to impairment were rejected,

most relevantly the contention that privatisation should be halted because it would

materially impair the ability of the Crown to remedy Treaty breaches which were not

related to the activities of the generating companies. This argument proceeded on

the basis that the assets of generating companies should be seen as available to meet

unrelated claims, say for instance for degradation to rivers caused by farming. In

this respect, the Tribunal considered that there was an insufficient nexus between the

underlying claims and the assets being sold.130

[125] Thirdly, the Tribunal noted that “a commercial option for rights recognition

or redress (where recognition is not possible) is essential” and then went on:131

In our view, the Crown is correct that it will still be able to provide many

such options after the sale of shares in the MOM companies. We think that

the claimants’ evidence has shown that it will be significantly more difficult

for the Crown to do so once it has introduced thousands of ‘mum and dad’

investors into the political mix. We suspect that the Crown’s evidence

underestimated the political obstacle that these new interests will put in the

way of a tax, levy, royalty, or resource rental for the use of water to generate

129

Freshwater Report, above n 11, at [3.6.1]. 130

At [3.7.4]. 131

At [3.9.2].

electricity. We note ... evidence ... that, as with the emissions trading

scheme, a new regime could be introduced sector by sector. The Crown

could start with hydroelectricity (it is already empowered to charge royalties

for geothermal energy), and it would surely be much easier to do so before

there are private interests in the companies which command three-quarters of

New Zealand’s hydro generation capacity. But it will not be impossible for

the Crown to introduce this kind of rights recognition or redress after the

partial privatisation of the MOM companies. As the Crown says, it will have

to balance the interests concerned (including the possibility of consumer

price rises) in a Treaty-compliant manner. But we note the Crown’s own

evidence and submissions that it may be possible to provide a commercial

option that does not affect profit or result in price rises. We also note the fact

that the ‘zero cost for water’ may be about to disappear in any case, if

charges for water permits are introduced to help increase efficiency. As we

said earlier, such charges might be paid to or shared with Maori.

We accept the Crown’s assurances, given as part of our inquiry, that it is

open to discussing the possibility of Maori proprietary rights (short of full

ownership), that it will not be ‘chilled’ by the possibility of overseas

investors’ claims, and that the MOM policy will not prevent it from

providing appropriate rights recognition once the rights have been clarified.

We trust that our report has now clarified the rights for the Crown.

[126] The Waitangi Tribunal had earlier in its report discussed the concept of

“shares plus”, involving the creation of a special class of share with special voting or

other rights, which could be vested in Maori claimants. As it recognised, the

creation of special classes of shares for this purpose would have to be attended to

before, rather than after, privatisation. It then returned to this topic immediately after

the passage we have just cited:132

But there is one area in which the Crown will not be able to provide

appropriate rights recognition or redress after the partial privatisation, and

that is in the area that we have termed ‘shares plus’: the provision of shares

or special classes of shares which, in conjunction with amended company

constitutions and shareholders’ agreements, could provide Maori with a

meaningful form of commercial rights recognition. As we have found,

‘shares plus’ are not ‘fungible’ and company law would in practical terms

prevent the Crown from providing this form of rights recognition after the

introduction of private shareholders, certainly after the sale of more than 25

per cent of shares and arguably before that too. The detailed analysis of

company law and of the parties’ evidence and submissions that supports this

finding is set out above in sections 3.7.3 and 3.8.2.

We conclude therefore that the sale of up to 49 per cent of shares in power-

generating SOE companies will affect the Crown’s ability to recognise Maori

rights and remedy their breach, where such breach is proven.

132

At [3.9.2].

[127] There is one point we should make about the passage cited at [125] from the

Freshwater Report. In that passage the Tribunal seems to have concluded that

because certain forms of redress would not be impossible after privatisation, the

material impairment test was not satisfied. We agree with Mr Carruthers, for the

appellants, that material impairment may be demonstrated in relation to a particular

form of redress even if, after the privatisation in question, such redress is not

impossible.

The approach of Ronald Young J in the High Court

[128] In rejecting the contention that the privatisation of the power-generating

companies would materially impair the ability of the claimants to secure redress,

Ronald Young J concluded that legislative change to provide redress would be as

possible after privatisation as it is now. He saw little connection between shares in a

power-generating company (even shares with enhanced rights) and the rights which

the claimants were asserting.133

He considered that the “shares plus” proposal was

not consistent with Part 5A of the Public Finance Act and, in particular, the

requirement that the Crown have a 51 per cent interest in every class of shares.134

As

well, if implemented, the “shares plus” proposal would not provide an effective

mechanism for Maori to obtain control over water resources and a commercial return

associated with their exploitation.135

On the other hand, such implementation would

seriously prejudice the ability of the Crown to realise full value for the 49 per cent of

the shares which are to be sold.136

He stressed that the obligation of the Crown was

to take “reasonable” action and he had no difficulty in concluding that this did not

extend to implementing the “shares plus” proposal.137

[129] Ronald Young J also rejected the argument that the privatisation of the

power-generating companies would make it more difficult to introduce a royalty

payment system for the use of water:

133

High Court judgment, above n 6, at [188]. 134

At [194]–[195]. 135

At [195]. 136

At [199]. 137

At [208]–[209].

[227] ... In my view there is nothing to suggest that it will be any more

difficult to institute a rental (or royalty) payment system for water

after the sale of shares in [Mighty River Power]. Such a rental

system would likely relate to most, if not all, commercial use of

water. It could hardly be introduced for [Mighty River Power’s]

use only. It would likely require amendment to the Resource

Management Act 1991.

[228] Parliament is free to introduce such changes to the water use

regime as it chooses. There would be no unfairness to investors in

MOMs or indeed any entity currently using water for free to be

faced with a change for the resource. While this may be a change to

the commercial basis on which such entities operate, investors will

no doubt be aware of such potential changes. Commercial entities

are subject to regulatory change which can affect commercial

profitability (see, for example, the Emissions Trading Scheme and

the Resource Management Act).

[130] The Judge also concluded that if shares in the power-generating companies

were eventually seen as an appropriate mechanism for providing relief, the Crown

could, if necessary, buy on the open market such shares as were necessary.138

Our approach – a preliminary comment

[131] Two aspects of the case can be dealt with briefly:

(a) Mr Carruthers did not seek to argue that the viability of aboriginal

title claims at common law to the assets of the power-generating

companies would be affected by whether the power-generating

companies remain State enterprises or become mixed ownership

companies. So we propose to proceed on the basis that the proposed

privatisation will not have any effect on such claims.

(b) We consider that the Tribunal was correct in rejecting the contention

that privatisation should be halted on the basis that that it would

diminish the capacity of the Crown to provide redress for Treaty

claims unconnected with the development and use of the power-

generating capacity of Mighty River Power.139

The Crown has

capacity to meet such claims and there is no logical reason why it

138

At [239]. 139

See above at [124].

should be required to retain, against its will, particular assets (in this

case the shares in the generating companies), which are unconnected

in any meaningful way to the underlying Treaty claims.

[132] While asserting generally that privatisation would materially impair their

rights to redress for Treaty breaches, the appellants were not very specific as to the

particular respects in which this was said to be so – that is, by identifying specific

relief which is substantially in prospect and would become materially harder to

obtain post-privatisation. It is not easy to identify such prejudice except by careful

analysis of particular claims and the waters to which they relate and the case was not

conducted at that level of specificity. So the comment we have just made is not a

criticism of the appellants. Nonetheless, in a case where we are asked to infer

material impairment (a matter not easily susceptible to evidential proof) the lack of

specificity makes assessment more difficult.

[133] We have already referred to the framework for relief advanced by the

claimants in the Waitangi Tribunal.140

In the succeeding sections of this part of these

reasons we will evaluate the competing arguments by reference to the impact of

privatisation on (a) land claims (b) ownership and control of the power-generating

companies and (c) more general reform of the law relating to the governance and

management of water. A final contextual consideration which we will also address

is the current social and legislative environment in relation to Treaty rights.

The effect of privatisation on direct claims against the lands of the State enterprise

power-generating companies

[134] The memorial regime under s 27A of the State-Owned Enterprises Act and

the continuing operation in relation to mixed ownership companies of the resumption

procedures provided for under s 27B of that Act is significant protection for land

interests.141

The practical effect of the continued operation of the resumption

procedures is that outstanding claims142

for resumption in relation to the dams (and

140

Above at [123]. 141

Above at [18]. 142

We were told that a number of claims in relation to dams have been settled and that the

memorials in relation to those dams have been removed.

any other memorialised property) of the mixed ownership companies will be

unaffected by privatisation.

The significance of privatisation in relation to the ownership and control of the

power-generating companies

[135] Crown ownership and control of the power-generating companies will

undoubtedly be diminished by privatisation. Once the power-generating companies

become mixed ownership companies and have private shareholders, they will have

to be run in a way which is consistent with the rights of the minority shareholders

and directors will be required to act in a manner which is in the best interests of the

company concerned. The important features of the way in which State enterprises

operate, including their relationship with shareholding Ministers,143

were stressed by

the Privy Council in the Broadcasting Assets case.144

They will no longer be

present. This means that privatisation might preclude or limit the possibility of some

options for redress which would otherwise be possible: for instance, the “shares

plus” proposal, or royalty regimes which are particular to the State enterprise power-

generating companies, or reparation out of the water assets of the State enterprise.

[136] In assessing the materiality of this, certain considerations must be kept in

mind:

(a) Irrespective of whether privatisation occurs, the current power-

generating infrastructure and its significance for the wider

New Zealand economy are facts on the ground which will not be

ignored. The appellants are not seeking, and in any event the Crown

could not agree to, settlements which would be inconsistent with the

continuing efficient operation of the current power-generating

capacity.

(b) Given the vast public expenditure associated with the construction of

the power-generating infrastructure, the courts should be slow to insist

on protective measures which would prevent the Crown from

143

See above at [33] and [36]. 144

Broadcasting Assets case (PC), above n 46, at 520.

obtaining full value – for the benefit of the country as a whole – when

the shares in the mixed ownership companies come to be sold. A

clear purpose of the mixed ownership model legislation is that the

Crown should obtain full value and it would be a strong step for the

courts to insist on protective measures which were inconsistent with

that end.

(c) The Waitangi Tribunal described the ownership interest guaranteed by

the Treaty in terms of use and control.145

In large part, this may be

more directly delivered through changes to the regulatory system,

augmented by specific settlements, as Crown policy proposes.

Regulation of water use and control is under review by the Crown and

the settlements have indicated the willingness of the Crown to

consider extension of Maori authority in connection with specific

waters. There may be some ownership interest insufficiently

addressed by regulatory reform, but the significance of the interest

needs to be assessed against the opportunities under consideration for

real authority in relation to waters of significance. That is the context

in which the materiality of the sale of a minority interest in a company

using the waters must be considered.

(d) In assessing the significance of shares as redress, it is important to

recognise that they can only be a proxy for the underlying claims (as

the Waitangi Tribunal has recognised) and this is particularly so where

such shares could be sold once received. So the significance of shares

as a means of redress should not be overstated.

(e) Water rights, unlike the ownership of land, are limited to 35 year

terms. Although in reality such rights are likely to be renewed while

used for electricity generation, the terms of renewal remain under

review. Indeed, under the current permits for Mighty River Power,

the terms must be reviewed to conform with any Treaty settlement.146

145

Freshwater Report, above n 11, at [3.6.1(3)]. 146

See above at [14].

[137] The Crown claims that, if required to settle claims with shares, it would be

able to do so by buying them back. We agree. There is no reason to think that the

Crown will lack the capacity to do so. It follows that following privatisation, the

Crown will retain an appropriate level of capacity to offer Maori shares and,

associated with this, a commensurate measure of influence.

[138] As we have explained, Part 5A of the Public Finance Act requires the Crown

to hold a 51 per cent interest in every class of shares. The “shares plus” proposal is

not really compatible with this requirement and is thus inconsistent with the mixed

ownership model provided for in the legislation.147

More importantly, it is difficult

to see that “shares plus” would produce reparation that would be more beneficial to

Maori aspirations in relation to water148

than can be achieved by regulatory reform

and associated settlements. As noted too, it is plainly a purpose of the legislation

that the Crown should obtain full value and insistence on a “shares plus”

arrangement would have the effect of defeating that purpose.

[139] It is not entirely easy to envisage the imposition of a royalty regime on the

generation of electricity which was confined to the State enterprise power-generating

companies, and there are currently two substantial private power-generating

companies, Contact Energy Ltd and Trust Power Ltd. Any proposal to impose

royalties on electricity generation would be likely to attract opposition from those

companies and their shareholders, as well as the Crown (which has so far refused to

contemplate such arrangements) and the public at large, who would be affected by

likely consequential increases in power costs. The introduction of private

shareholders in mixed ownership companies would thus not have a material effect on

the level of opposition. As well, as Mr Goddard pointed out, a targeted levy on

147

There is scope for debate as to the significance of this inconsistency as Treaty settlements are

often implemented by statute. Thus the settlement of the SOE case involved amendments to the

State-Owned Enterprises Act. On the other hand, the orders made by the Court of Appeal in the

SOE case, above n 25, at 666 did not address statutory amendments and there is nothing in the

judgments to suggest that the State-Owned Enterprises Act could not be implemented

consistently with Treaty principles. It might be thought a bold step for a court to conclude that a

recent statute could not, as enacted, be implemented consistently with Treaty principles. 148

Given that the duties of directors are to the company rather than to particular shareholder groups,

special voting rights, for instance, would give Maori no direct, and little indirect, influence (let

alone control) over the governance or management of a mixed ownership company. Any attempt

to impose special rules in relation to mixed ownership companies which had the effect of giving

a particular shareholder group direct influence over its governance would be problematic and

would significantly impair what would otherwise be the realisable value of the shares to be sold.

Mighty River Power would distort competition among electricity suppliers. It must

also be remembered that the corollary of the retention of a 51 per cent stake in the

power-generating companies is that the Crown will derive what will almost certainly

be a substantial dividend revenue which would be available, should this ever prove

to be necessary, to provide redress in respect of the continuing operation of the

dams.

[140] It can be accepted that reparation by transfer of the water permits themselves

to Maori will not be in realistic prospect after privatisation because it would

expropriate value in the company from private minority shareholders. Since it is

however implausible to suggest that the use of the water could be withheld from the

generation of electricity through the significant assets owned and maintained by

Mighty River Power, in effect proprietary recognition through the water permits is

likely to be of value as reparation only to provide a basis for payment to Maori of

royalties in respect of the particular waters used (rather than under a royalty system

imposed more generally on all users). It is difficult, in substance, to distinguish such

remedy from compensation, which the Crown is able to supply directly should it be

appropriate.

[141] In addition, the 35 year term of the permits gives opportunity for review on

their renewal. In addition, the terms of the water permits held by Mighty River

Power allow review should they be affected by a Treaty settlement, as has already

been described.149

Given these circumstances and the wider context now provided in

legislation for recognition of Maori authority in relation to waters (discussed in what

follows), we consider that the Crown was justified in suggesting that protection of

Maori in the waters comes close to the memorialisation protection put in place for

land.

The effect of privatisation on more general reform of the law relating to the

governance and management of water

[142] A primary concern of the appellants is the way in which water is managed

under the Resource Management Act. There are two aspects to this concern – one

149

See above at [14].

addressed to the general governance and management (currently largely vested in

regional councils) and the other to their lack of ability to derive income from the

exploitation of what they see as their water resources. Addressing these issues

would involve changes to the Resource Management Act. The concern is that

privatisation will increase the number of commercial stakeholders in the current

water control regime and in this way tend to limit the likelihood of more general

recognition of Maori interests in water.

[143] In assessing these arguments, it must be remembered that the Resource

Management Act currently provides substantial recognition of Maori interests.150

We have already discussed the relevant provisions of that Act and the current water

permits held by Mighty River Power which are able to reviewed following any

relevant Treaty settlement.

[144] Also material is the current Fresh Start for Fresh Water process, which is

being conducted against agreements that no disposition or creation of property rights

in water will be undertaken by the Crown without first engaging with iwi and that

iwi will be involved in the second stage of reviewing the Resource Management Act,

a long-term and difficult project needed to bring about sustainable change. The

Deputy Prime Minister explained in his evidence that engagement with Maori in

relation to the Fresh Start for Fresh Water programme is being conducted in three

ways: through direct engagement between iwi and the Crown through the

Freshwater Iwi Leaders Group and Ministers; through Maori membership of the non-

governmental Land and Water Forum; and by engagement by officials in developing

policy with the Iwi Advisers Group (which advises the Iwi Leaders Group).

[145] Mr English summarised the Crown position as being that it acknowledges

that Maori have “rights and interests in water and geothermal resources”.

Identifying those interests is being addressed through the “ongoing Waitangi

Tribunal Inquiry” and a number of “parallel mechanisms”.151

The Crown position is

that any recognition must “involve mechanisms that relate to the on-going use of

those resources, and may include decision-making roles in relation to care,

150

See above at [97]–[98]. 151

Affidavit of the Deputy Prime Minister, above n 114, at [29].

protection, use, access and allocation, and/or charges or rentals for use. Currently

the Ministry for the Environment has responsibility for progressing policy

development around these issues.”152

The Court should accept that it is not an empty

exercise.

[146] It is against this background that the Court must assess the concerns of the

appellants that the introduction of private shareholders into the mixed ownership

companies will increase the number of people with a stake in the current regime and

thus impede reform which would be beneficial to Maori. While these concerns are

understandable, it is difficult to see how privatisation will make a material difference

to the ultimate outcome. The Crown sees general reform as being necessary, a view

that does not appear to be substantially in dispute. And the interest which

shareholders in the mixed ownership companies can be expected to take in the

reform process will not be materially different from that of commercial users of

water (including the two privately-owned power-generating companies).

The current social and legislative environment in relation to Treaty rights

[147] The changes in the social and legislative context since the SOE case was

decided have already been described. They are reinforced by the explanations given

by Ministers in the course of these proceedings and are further evolving under the

initiatives to address freshwater more generally and the recognition of Maori

interests specifically.

[148] The Waitangi Tribunal will, in due course, conclude its Freshwater inquiry

and the Crown will be required to respond to its recommendations. It is, of course,

uncertain what the ultimate outcome will be, but the trend since the SOE case should

provide reassurance that Maori claims are not being ignored. Sustainable

settlements need time to work out, as the Deputy Prime Minister has pointed out.

This means that taking advantage of what the Waitangi Tribunal saw as a “here and

152

At [29]. See also Land and Water Forum Second Report of the Land and Water Forum: Setting

Limits for Water Quality and Quantity, and Freshwater Policy- and Plan-Making Through

Collaboration (2012) and Land and Water Forum Third Report of the Land and Water Forum:

Managing Water Quality and Allocating Water (2012).

now” opportunity153

for providing commercial redress under pressure of the present

dispute would be unlikely to produce a durable solution. This is not to say that the

water claims should be parked. The Waitangi Tribunal has emphasised the need for

urgency in addressing proprietary claims. It appears from the policy initiatives and

from the assurances given in the litigation that the message that there is need for

action on these claims has been accepted.

Conclusion on this issue

[149] As is apparent, we are prepared to accept that privatisation may limit the

scope to provide some forms of redress which are currently at least theoretically

possible. But in assessing whether this amounts to “material impairment”, regard

must be had to (a) the assurances given by the Crown, (b) the extent to which such

options are substantially in prospect, (c) the capacity of the Crown to provide

equivalent and meaningful redress, and (d) the proven willingness and ability of the

Crown to provide such redress.

[150] For the reasons given, we are not persuaded that a material impairment arises

from the proposed sale of shares.

Result

[151] We dismiss the appeal. We have decided there should be no order as to

costs. While the appellants have failed as to the ultimate result, they nonetheless

succeeded on an important point of principle, namely that the Crown was bound to

comply with the principles of the Treaty before deciding to sell the shares.

Solicitors: Woodward Law, Lower Hutt, for Appellants Crown Law Office, Wellington, for Respondents Bennion Law, Wellington, for Interveners

153

See above at [24] and n 39.